TMTPOST -- Deutsche Bank said in its latest report on Wednesday that 2025 will be the year when China surpasses other countries in terms of manufacturing and services, recommending investors to buy Chinese stocks. 

The investment bank predicts that the "valuation discount" on Chinese stocks will disappear, and the bull market in A-shares, which refer to stocks in the Chinese mainland, and Hong Kong stocks will continue, setting new highs.

2025 is expected to be the year when investing world recognizes China's leadership in global competition, the report said. It is becoming increasingly difficult to ignore the fact that Chinese companies offer high-value and high-quality products across various manufacturing and service sectors.

The bank anticipates that the valuation discount on Chinese stocks will be gone, and profitability could exceed expectations due to policy support for consumption and financial liberalization. The bull market in Hong Kong and the Chinese mainland, which began in 2024, is expected to exceed previous highs in the medium term.

Deutsche Bank stresses China's dominance in global manufacturing and services, with the rise of DeepSeek marking what it called China's "Sputnik moment"—a key infraction point for transformation and progress.

China leads in industries such as apparel, textiles, toys, basic electronics, steel, and shipbuilding, as well as in complex sectors like telecommunications equipment, nuclear energy, defense, and high-speed railways. In 2025, China launched the world's first sixth-generation fighter jet and its low-cost AI system DeepSeek within a single week, the report said.

Deutsche Bank compared China's current position to Japan in the early 1980s when Japan's value chain was rapidly rising, offering higher-quality products at lower prices while continuously innovating.

According to the report, the U.S.-China trade tensions could bring unexpected positive outcomes and that trade and markets are not as tightly linked as commonly perceived:

As Chinese companies continue to solidify their dominance on the global stage, the valuation discount should eventually turn into a premium. The bank believes that investors will have to shift toward China in the medium term, and it will become increasingly difficult to acquire Chinese stocks without driving prices higher.