Industrial: In 2026, focus will be on the opportunities for electric, TMT, new consumption and other industries to expand overseas.

The Industrial team led by Zhang Qiyao released a research report stating that in the macro background of normalizing global geopolitical games, the global industrial system is undergoing a profound paradigm shift from "efficiency first" to "safety and autonomy", which will continue to bring a large demand for infrastructure and industrial construction. Chinese manufacturing is gradually forming a deep connection with the current supply chain construction, and this supply chain's deep connection is difficult to easily break, but instead becomes tighter due to exports, further driving China's role transformation from "final product exporter" to "global basic industrial provider". Taking into account various factors such as overseas demand, overseas gross profit margin, overseas factory construction, in 2026, there are high certainty opportunities for going abroad in categories such as electricity (batteries, grid equipment), machinery (construction machinery, specialty equipment, general equipment, automation equipment), TMT (electronics, communications, games), as well as innovative drugs, new consumption, shipbuilding, commercial vehicles, automotive parts, and chemical products. The main points of the Industrial Report are as follows: 1. Diversification and high-end development of Chinese foreign trade: In 2025, despite the complex external environment, China's foreign trade continued to exceed expectations, showing strong resilience. Faced with weak global economic recovery and escalating tariff frictions, China's total export volume reached a historical high in 2025, with a year-on-year growth of 5.5%. During the same period, China's trade surplus exceeded $1 trillion for the first time, a substantial increase of 19.8% year-on-year. Foreign trade has become an important engine for economic growth. At the macroeconomic level, in 2025, the net exports of goods and services contributed 1.64 percentage points to GDP growth, the second-highest level since 2007, only behind 2021. At the listed company level, the profit growth rate of the export chain in 2025 Q3 reached 12.96%, significantly better than non-financial A shares (1.92%), leading for 9 consecutive quarters, and the growth rate difference widened to 11.03%. In terms of regional structure, the diversification of foreign demand has further strengthened, with the increase in emerging markets effectively compensating for the decrease in the US market. Due to tariff trade friction, China's direct exports to the US were significantly under pressure in 2025, decreasing by 19.79% year-on-year. This formed a 2.91% drag on the total export volume. The share of the US in China's exports decreased by a further 3.53 percentage points to 11.15%. Emerging markets have taken over with rapid growth, becoming new export growth pillars. Apart from the China-Hong Kong-Taiwan region, exports to Africa/ASEAN/Middle East regions increased by 25.9%/13.64%/9.7% respectively, contributing 1.29%/2.24%/0.64% to the total export volume. In addition, China's exports to the EU are steadily recovering, with an 8.57% year-on-year increase contributing positively to the total export volume. In terms of product structure, China's foreign trade goods structure continues to move towards the upstream of the value chain, with outstanding performance in mid-to-high-end products. In 2025, mid-to-high-end manufacturing industries such as electrical/electrical products, machinery, automobiles, and ships were still the main exports, bringing 44.10%, 17.67%, 16.05%, and 6.99% respectively to the total export volume. Traditional light industry products such as furniture, toys, and socks saw a significant decline under the double impact of tariff friction and industrial chain relocation. Looking further into segments, ASEAN takes on China's industrial chain overflow and trade re-exports, significantly contributing to China's key commodity exports. Other emerging markets are also becoming new growth poles for Chinese core industrial exports like vehicles, ships, and electronics. The European market's industrialization and energy transformation processes are locking in demand for green industrial products from China, while aging demographics are driving expansion in pharmaceutical imports. Apart from copper demand brought about by market arbitrage, direct demand from the US for key Chinese export commodities has shrunk to varying degrees. 2. What are the high certainty opportunities for the outbound chain in 2026? 2.1. Global supply chain restructuring In the macro background of normalizing global geopolitical games, the global industrial system is undergoing a profound paradigm shift from "efficiency first" to "safety and autonomy", which will continue to bring a large demand for infrastructure and industrial construction. Developed countries in Europe and America advocate for onshoring industrialization and under the principles of "nearshore outsourcing" and "friendly shore outsourcing", are transferring supply chains to emerging market countries. Coupled with the Fed's interest rate cuts, this will further release the financing and production potential that has long been suppressed by high-interest rates in emerging markets. In this context, China's export structure has made adaptive adjustments: in recent years, the proportion of consumer goods in China's exports has been decreasing, while the intermediate and capital goods serving the reconstruction of the global manufacturing supply chain are taking a dominant position. Benefiting from cost advantages due to technological breakthroughs and economies of scale, China has captured a large market share increment in important industrial categories that have experienced rapid global export growth since 2018, such as electric vehicles, batteries, semiconductors, ships, and machinery. Furthermore, the restructuring of the global supply chain has also accelerated the globalization of Chinese companies' production capacity. According to the number of announcements of capacity construction/subsidiaries by A-share listed companies in ASEAN/India/Mexico to observe the situation of Chinese companies going global, this number reached 229 companies in 2025, nearly doubling from 2024. Chinese capacity going global is not simply a matter of transferring supply chains, but also an extension of China's local supply chain. During the construction phase, a large number of Chinese equipment imports are needed, and after production, continuous imports of intermediate goods from China are required. ASEAN, Mexico, and India are the main recipients of Chinese capacity going global. Looking at the changes in import and export market share and outbound factory construction data, ASEAN has comprehensively absorbed the external spillover of China's industrial chain, covering multiple industries such as textiles and apparel, home appliances and furniture, consumer electronics, and automobiles, while Mexico and India show distinct "single-track" characteristics, respectively absorbing China's automotive and consumer electronics industries. In summary, Chinese manufacturing is gradually becoming deeply intertwined with the current supply chain construction, and this deep connection of the supply chain is difficult to easily sever. Instead, due to going global, it is becoming even tighter, further driving China's transformation from an "exporter of final products" to a "global provider of basic industries." 2.2. AI expansion cycle Supported by overseas prosperity, AI computing hardware is one of the core themes in the current Chinese capital market. However, since the end of last year, the market has had doubts about the sustainability of the AI expansion cycle, fearing that the large-scale financing and capital expenditure brought about by the AI arms race among overseas giants would put pressure on the balance sheets of enterprises. Looking ahead, based on historical comparisons of macro investment size, listed company financial reports, and liquidity environment, the AI expansion cycle still has sustainability and can provide strong support for the high growth of AI computing hardware. At the macroeconomic level, looking at the share of investment in computer equipment + communication equipment + data centers and information technology processing equipment in the US GDP, although capital expenditure in the AI field has surged significantly, it is still significantly lower than during the dot-com bubble period. At the listed company level, although tech giants have raised funds through debt financing to increase capital expenditure, causing concerns in the market, unlike the dot-com bubble, the balance sheets and cash flow statements of current US technology leaders are still healthy. As of 25Q3, the net debt-to-equity ratio and net debt/EBITA of the S&P 500 Information Technology sector were both below 90s levels. Moreover, major tech giants have ample free cash flow to cover capital expenditures, and the proportion of CAPEX to free cash flow remains below the peak of the dot-com bubble period in the 90s. In terms of liquidity, there are significant advantages compared to the dot-com bubble: to prevent the economy from overheating, the Fed started an interest rate hike cycle in June 1999, raising interest rates by 175bp within a year, quickly raising financing costs and accelerating the cash depletion of Internet companies at the time. Whereas, currently the Fed is in an interest rate reduction cycle, so concerns about tightening liquidity suddenly leading to difficulty in financing for AI companies are probably not going to materialize in 2026. Furthermore, based on the latest capital expenditure guidance from tech giants, the capital expenditure of major tech giants in 2026 is expected to maintain high growth, with new technologies and demands in the industry chain accelerating. In 2025, the capital expenditure of major overseas cloud service providers significantly increased, with total capital expenditure of the top four cloud service providers in North America reaching $359.2 billion. In 2026, the capital expenditure guidance for the top four cloud service providers - Amazon, Google, Meta, and Microsoft - is estimated to be approximately $598.7 billion, with a predicted 67% year-on-year growth. This reflects the logical competition for arms race, indicating that the global demand for AI computing power still has strong certainty. At the same time, the impact of high growth in AI capital expenditure is being transmitted upstream and downstream: the surge in US AI electricity demand on the upstream side is greatly driving terminal demand for grid equipment and energy storage equipment; on the downstream side, the landing path for hardware is clear, benefiting leading players in domestic manufacturing as the volume of AI hardware shipments continues to rise. 2.3. AI expansion cycle In addition to product exports and capacity spillover, another major trend for Chinese companies going global is the comprehensive value output of culture and technology. Cultural output is specifically manifested in IP going global (toys, games, etc.) and lifestyle going global (new catering, internet e-commerce, etc.). Toys: Top companies like POP MART have successfully entered the international market through localized operations and innovative IP designs, with overseas business income accounting for over 40% in the first half of 2025, showing higher growth rates overseas than domestically. Games: According to the "2025 Chinese Game Industry Report", the actual sales revenue of domestically developed games in the overseas market reached $20.455 billion in 2025, a year-on-year growth of 10.23%. This revenue scale has been maintained above one hundred billion yuan for six consecutive years. The deep application of AI technology is reshaping production flows, accelerating content generation, greatly improving localization efficiency, and effectively reducing the marginal costs of going global. New Catering: represented by Heytea, in Southeast Asian and other nearby markets, Chinese new tea drink brands have rapidly gained market share by providing "high quality-price ratio" products that meet the needs of young people for fresh experiences and social spaces. Internet E-commerce: represented by Temu, Shein, and others, leveraging China's strong light industry supply chain, through the C2M (Consumer-to-Manufacturer) model, they are globalizing the value proposition of "fast, good, and cheap", not only exporting products but also the efficient fulfillment standards and algorithmic recommendation capabilities of Chinese e-commerce. At the same time, the technological output going global, represented by innovative drugs like BD, is also receiving attention. In 2025, Chinese innovative drugs are deeply integrated into the global industrial chain, and are actively going global through independent efforts as well as licensing-out, with several new drugs achieving commercialization and volume in the US and Europe, with BD transaction amounts and quantities steadily rising, becoming a significant supplier of global innovative drugs. Looking ahead to 2026, there are more potential opportunities for major products to go global. 3. Which specific outbound chain directions are worth paying attention to? Considering the rise of trade protectionism in multiple countries and the potential negative impact of RMB appreciation, we will combine overseas gross profit margin data to select industries that have high profitability levels abroad and have sufficient willingness to expand overseas. Taking into account various factors such as overseas demand, overseas gross profit margin, overseas factory construction, in 2026, there are high certainty opportunities for going abroad in categories such as electricity (batteries, grid equipment), machinery (construction machinery, specialty equipment, general equipment, automation equipment), TMT (electronics, communications, games), as well as innovative drugs, new consumption, shipbuilding, commercial vehicles, automotive parts, and chemical products. In these industries mentioned above, we further screen out outbound chain industries in 2026 that are expected to accelerate performance growth from the perspectives of order backlog and profit expectations. From the order backlog perspective: using the total contracted liabilities + advances to represent the company's order backlog situation. Historical data shows that the order backlog growth rate of non-financial A-shares can be used as a leading indicator of performance growth (leading by 1.2 quarters), reflecting the company's production and operational activity in advance. We select industries with high year-on-year order backlog growth in 25 Q3 and a trend of increasing order backlog growth in recent quarters. From the consistent expectations perspective: starting from Wind's consistent expectations, we focus on filtering out sub-directions where the expected performance growth in 2026 is above 30%, and improving compared to 25 Q3. Finally, considering the 2026 performance and current valuation levels, we focus on investment opportunities in the commercial vehicle, battery, construction machinery, chemical pharmaceutical, and gaming industries.