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China Turnaround in 2026? 3 Stocks to Play the Rebound
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Key Takeaways
China signaled a 2026 turnaround as Beijing shifted to a looser policy & made domestic demand a top priority.
Tencent Holdings could benefit from rising consumer spending as stimulus measures support growth across China.
BIDU is positioned to gain as China's AI sector expands alongside stronger tech and manufacturing trends.
China's bold policy changes and booming tech sectors are creating fresh momentum for U.S.-listed Chinese companies like Tencent Holdings (TCEHY - Free Report) , Bilibili (BILI - Free Report) , and Baidu (BIDU - Free Report) , as Beijing prepares for an economic turnaround in 2026.
In December 2025, China's Politburo announced a major policy change, moving to a moderately loose monetary policy for the first time since 2010. This represents a clear break from 14 years of careful, measured policy. The Central Economic Work Conference followed up with specific plans, including a 4% budget deficit target and making domestic demand the top priority for 2026.
Major financial institutions are also responding positively. Goldman Sachs raised its 2026 GDP forecast to 4.8%, while the IMF now expects 4.5% growth next year. These upgrades reflect growing confidence in China's recovery plans.
Technology And Manufacturing Lead the Way
China's technology sectors are showing remarkable strength. The artificial intelligence market is expanding rapidly, with e-commerce giants like Alibaba (BABA - Free Report) and JD.com (JD - Free Report) using AI to improve customer shopping experiences through personalized recommendations and virtual assistants. The China e-commerce market reached a value of approximately $2.42 trillion in 2025. The market is projected to witness a CAGR of 8.9% between 2026 and 2035, reaching a value of around $5.68 trillion by 2035, per Expert Market Research.
In manufacturing, China is making significant progress in semiconductors and electric vehicles. Chinese manufacturers are advancing in silicon carbide production, a critical material for electric vehicles and renewable energy. The electric vehicle sector hit record sales of 1.82 million units in November 2025, capturing 53% of the domestic market.
Beijing is also investing heavily in green energy and advanced manufacturing technologies, with Alibaba alone committing more than $50 billion for cloud and AI development. These investments are strengthening China's position in global technology competition.
Economic Indicators Show Improvement
Recent data support the positive outlook. November's manufacturing activity reached a five-month high, while consumer prices rose to 0.7%, the highest in 21 months. These signs suggest government stimulus measures are working.
For U.S.-listed Chinese stocks, this combination of supportive government policies and strong industry trends creates an encouraging environment heading into 2026.
Stocks Positioned for the Rebound
Tencent, with its dominant social media and gaming platforms, stands to gain from increased consumer spending. Baidu's AI capabilities position it well in China's expanding artificial intelligence sector. Bilibili, a leading video-sharing platform popular among younger Chinese consumers, could benefit from the government's focus on boosting domestic consumption. These stocks have experienced recent weakness, creating potential entry opportunities for investors. Over the past three months, shares of Baidu, Tencent and Bilibili have lost 13.5%, 9.3% and 12.5%, respectively. This underperformance comes despite their strong positions in China's growing digital economy.
The chart below shows the price performance of our three picks in the past three-month period.
Image Source: Zacks Investment Research
Tencent Holdings merits close watch in 2026 following December 2025 announcements of record gaming sales generating $10 billion internationally, defying industry slowdowns. Third-quarter 2025 results showed 15% revenue growth with international gaming surging 43%. With 1.4 billion WeChat users and AI integration enhancing advertising and gaming, core businesses remain robust. Management confidence is evident through a 32% dividend increase and ongoing buybacks. China's supportive 2026 policies targeting domestic consumption align with Tencent's diversified ecosystem. This Zacks Rank #1 (Strong Buy) stock's recent decline creates an attractive entry point for investors seeking exposure to China's technology recovery. The Zacks Consensus Estimate for TCEHY’s 2026 earnings has moved north by 13.6% to $4.5 per share over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Image Source: Zacks Investment Research
Bilibili deserves investor attention in 2026 following its profitability turnaround. The video platform posted RMB469 million net profit in third-quarter 2025 versus losses in the year-ago period, with adjusted net profit surging 233% year over year. Notably, 13 consecutive quarters of gross margin expansion (36.7%) demonstrate operational excellence, while advertising revenues jumped 23% as brands recognize Bilibili's engaged Gen-Z audience. With 117 million daily users spending a record 112 minutes daily, and monthly paying users reaching 35 million, monetization is accelerating. Management's midterm targets of 40-45% gross margins and December 2025 share option exercises signal confidence in this Zacks Rank #3 (Hold) company's sustained growth. The Zacks Consensus Estimate for BILI’s 2026 earnings has moved north by 6.8% to $1.1 per share over the past 60 days.
Image Source: Zacks Investment Research
Baidu represents a compelling 2026 watch as China's AI leader undergoes transformation. December's Kunlunxin spin-off announcement unlocks $3 billion in semiconductor value while maintaining strategic chip control. ERNIE 5.0 strengthens foundation model capabilities as AI-powered businesses surge more than 50% year over year to RMB 10 billion, accelerating diversification beyond advertising. The Abu Dhabi autonomous driving partnership, scaling to hundreds of vehicles in 2026, validates Apollo Go's commercial viability. JPMorgan's upgrade to $188 price target reflects growing institutional confidence. Trading near $125 with significant analyst upside, Baidu's full-stack AI ecosystem — spanning search, cloud, autonomous driving, and proprietary chips — positions this Zacks Rank #3 company advantageously amid China's economic recovery. The Zacks Consensus Estimate for BIDU’s 2026 earnings has moved north by 1.1% to $8.36 per share over the past 60 days.
Image Source: Zacks Investment Research
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China Turnaround in 2026? 3 Stocks to Play the Rebound
Key Takeaways
China's bold policy changes and booming tech sectors are creating fresh momentum for U.S.-listed Chinese companies like Tencent Holdings (TCEHY - Free Report) , Bilibili (BILI - Free Report) , and Baidu (BIDU - Free Report) , as Beijing prepares for an economic turnaround in 2026.
In December 2025, China's Politburo announced a major policy change, moving to a moderately loose monetary policy for the first time since 2010. This represents a clear break from 14 years of careful, measured policy. The Central Economic Work Conference followed up with specific plans, including a 4% budget deficit target and making domestic demand the top priority for 2026.
Major financial institutions are also responding positively. Goldman Sachs raised its 2026 GDP forecast to 4.8%, while the IMF now expects 4.5% growth next year. These upgrades reflect growing confidence in China's recovery plans.
Technology And Manufacturing Lead the Way
China's technology sectors are showing remarkable strength. The artificial intelligence market is expanding rapidly, with e-commerce giants like Alibaba (BABA - Free Report) and JD.com (JD - Free Report) using AI to improve customer shopping experiences through personalized recommendations and virtual assistants. The China e-commerce market reached a value of approximately $2.42 trillion in 2025. The market is projected to witness a CAGR of 8.9% between 2026 and 2035, reaching a value of around $5.68 trillion by 2035, per Expert Market Research.
In manufacturing, China is making significant progress in semiconductors and electric vehicles. Chinese manufacturers are advancing in silicon carbide production, a critical material for electric vehicles and renewable energy. The electric vehicle sector hit record sales of 1.82 million units in November 2025, capturing 53% of the domestic market.
Beijing is also investing heavily in green energy and advanced manufacturing technologies, with Alibaba alone committing more than $50 billion for cloud and AI development. These investments are strengthening China's position in global technology competition.
Economic Indicators Show Improvement
Recent data support the positive outlook. November's manufacturing activity reached a five-month high, while consumer prices rose to 0.7%, the highest in 21 months. These signs suggest government stimulus measures are working.
For U.S.-listed Chinese stocks, this combination of supportive government policies and strong industry trends creates an encouraging environment heading into 2026.
Stocks Positioned for the Rebound
Tencent, with its dominant social media and gaming platforms, stands to gain from increased consumer spending. Baidu's AI capabilities position it well in China's expanding artificial intelligence sector. Bilibili, a leading video-sharing platform popular among younger Chinese consumers, could benefit from the government's focus on boosting domestic consumption. These stocks have experienced recent weakness, creating potential entry opportunities for investors. Over the past three months, shares of Baidu, Tencent and Bilibili have lost 13.5%, 9.3% and 12.5%, respectively. This underperformance comes despite their strong positions in China's growing digital economy.
The chart below shows the price performance of our three picks in the past three-month period.
Image Source: Zacks Investment Research
Tencent Holdings merits close watch in 2026 following December 2025 announcements of record gaming sales generating $10 billion internationally, defying industry slowdowns. Third-quarter 2025 results showed 15% revenue growth with international gaming surging 43%. With 1.4 billion WeChat users and AI integration enhancing advertising and gaming, core businesses remain robust. Management confidence is evident through a 32% dividend increase and ongoing buybacks. China's supportive 2026 policies targeting domestic consumption align with Tencent's diversified ecosystem. This Zacks Rank #1 (Strong Buy) stock's recent decline creates an attractive entry point for investors seeking exposure to China's technology recovery. The Zacks Consensus Estimate for TCEHY’s 2026 earnings has moved north by 13.6% to $4.5 per share over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Image Source: Zacks Investment Research
Bilibili deserves investor attention in 2026 following its profitability turnaround. The video platform posted RMB469 million net profit in third-quarter 2025 versus losses in the year-ago period, with adjusted net profit surging 233% year over year. Notably, 13 consecutive quarters of gross margin expansion (36.7%) demonstrate operational excellence, while advertising revenues jumped 23% as brands recognize Bilibili's engaged Gen-Z audience. With 117 million daily users spending a record 112 minutes daily, and monthly paying users reaching 35 million, monetization is accelerating. Management's midterm targets of 40-45% gross margins and December 2025 share option exercises signal confidence in this Zacks Rank #3 (Hold) company's sustained growth. The Zacks Consensus Estimate for BILI’s 2026 earnings has moved north by 6.8% to $1.1 per share over the past 60 days.
Image Source: Zacks Investment Research
Baidu represents a compelling 2026 watch as China's AI leader undergoes transformation. December's Kunlunxin spin-off announcement unlocks $3 billion in semiconductor value while maintaining strategic chip control. ERNIE 5.0 strengthens foundation model capabilities as AI-powered businesses surge more than 50% year over year to RMB 10 billion, accelerating diversification beyond advertising. The Abu Dhabi autonomous driving partnership, scaling to hundreds of vehicles in 2026, validates Apollo Go's commercial viability. JPMorgan's upgrade to $188 price target reflects growing institutional confidence. Trading near $125 with significant analyst upside, Baidu's full-stack AI ecosystem — spanning search, cloud, autonomous driving, and proprietary chips — positions this Zacks Rank #3 company advantageously amid China's economic recovery. The Zacks Consensus Estimate for BIDU’s 2026 earnings has moved north by 1.1% to $8.36 per share over the past 60 days.
Image Source: Zacks Investment Research