If your CategoryItem doesn't contain a list of its children (like in the first version of the question), I would first of all build a Dictionary that foreach CategoryID gives you all the subcategory items, then recursively print all your items using this dictionary and starting with the items with parent "0". Assuming that Print is the instruction that print the data associated with your item, and that it takes as the only parameter the level of indentation, the code will look like this:

    public static void PrintItems(List<CategoryItem> items)
    {
        Dictionary<string, List<CategoryItem>> dictOfChildren = new Dictionary<string, List<CategoryItem>>();
        // loop through all the items grouping them according to their ParentID
        foreach (CategoryItem anItem in items)
        {
            List<CategoryItem> children;
            if (!dictOfChildren.TryGetValue(anItem.ParentID, out children))
            {
                children = new List<CategoryItem>();
                dictOfChildren[anItem.ParentID] = children;
            }
            children.Add(anItem);
        }
        // recursively print all the items starting from the ones with ParentID = 0
        // the dictionary is passed to the method in order to be able to find the children of each item
        PrintItems(dictOfChildren["0"], dictOfChildren, 0);
    }

    private static void PrintItems(List<CategoryItem> list, Dictionary<string, List<CategoryItem>> dictOfChildren, int levelOfIndentation)
    {
        foreach (CategoryItem anItem in list)
        {
            // first print the current item
            anItem.Print(levelOfIndentation);
            // then recursively print all its children
            List<CategoryItem> children;
            if (dictOfChildren.TryGetValue(anItem.CategoryID, out children) &&
                children.Count > 0)
                PrintItems(children, dictOfChildren, levelOfIndentation + 1);
        }
    }

It's not really object oriented, but this should give you a hint about the direction to follow.

EDIT:

I saw that you edited the question and that now you have added the SubCategory property. This makes things much simpler and you can simply do:

public static void PrintItems(List<CategoryItem> items)
{
    // call a recursive method passing 0 as level of indentation
    PrintItems(items, 0);
}

public static void PrintItems(List<CategoryItem> items, int levelOfIndentation)
{
    foreach (CategoryItem anItem in items)
    {
        // print the currentItem
        anItem.Print(levelOfIndentation);
        // increment the level of indentation and callk the same method for the children
        PrintItems(anItem.SubCategory, levelOfIndentation + 1);
    }
}