When many financial institutions with the obsession of copying the 'US pattern' to the Chinese market. Zhang focuses more on investigate the niche market between Chinese and foreign markets and investing in the Chinese economy with unique logic.
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Nowadays, the industry is widely distributed globally, especially in a large economy like China. Although each industry's growth space is huge, it is essential for venture capital firms to choose the industry of the greatest potential during the entrepreneurial process, then investigating the enterprise in the industry and the team in the enterprise. It is the same for an enterprise to choose an industry wisely because many industries have already saturated with limited development opportunities. But we already found some markets in crisis available for future exploration, and many 'hidden champions' in Dongguan probably perform well suddenly.
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On October 31, the 2012 China Venture Annual Conference-Beijing organized by ChinaVenture (China’s leading financial information service organization) was grandlyheld in Beijing JW Marriott Hotel. Tao Tao, apartner of CoStone Capital, delivered a speech at the annual meeting. The following are the main points of Tao Tao’s speech.
CoStone Annual Meeting 2012 kicked off at MGM Grand Sanya, Hainan on March 23, with nearly 300 investors and entrepreneurs being present.
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At the “Venture Investment: Industrial Upgrade Drivers and New Strategic Decisions Summit Forum”, CoStone Capital chairman Zhang Wei said that the venture capital industry was facing a big test and needed a more rational atmosphere.
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The fourth CoStone Capital Management Forum and the Launch Ceremony of the Wuhu Navigation CoStone Fund commenced on September 15. The Wuhu Navigation CoStone Fund, with a scale of over ¥600m (approx. $91.8m), is the tenth fund launched by CoStone Capital and invests in the growing SMEs. This forum focuses on the topics concerned by entrepreneurs and the investment industry, such as the macro economy, the micromanagement of enterprises and social science.
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On August 24, 2012, the China investment annual conference held by China Venture, was held at the Ritz-Carlton in Shenzhen. In this annual meeting, CoStone Capital won the honor of "2011 TOP10 Most promising PE firms in Shenzhen".
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In retrospect of 2011, the venture capital industry in China has experienced a fruitful year. The fundraising, investment amount, and investment quantity have reached a new high, which fully demonstrate the Chinese economy's viability and the vitality of the venture capital industry.
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Over the past year, the bull market returned, with technology leading the way.
As I said back in October 2024, the rally that began on September 24 was not merely a rebound, but a reversal. Since then, China's capital markets have undergone a broad revaluation, moving from undervaluation toward fair value.
The Shanghai Composite Index reached its highest level in a decade. The "Yi-Zhong-Tian" trio—Eoptolink, Zhongji Innolight and TFC Communication, three prominent Chinese optical communications stocks—saw their share prices multiply severalfold in a single year. Cambricon's market capitalization briefly exceeded RMB 600 billion. Elsewhere in the technology sector, triple-digit price-to-earnings ratios and valuations exceeding RMB 10 billion became commonplace.
Some investors were greedy; others, fearful. Still others asked me: Are technology stocks in a valuation bubble?
My answer is that what we are witnessing is the hunger and anxiety of an era, reflected in the capital markets. Once you understand this, the current fervor for technology investing is no longer difficult to explain.
Investment has nothing to do with macroeconomics, but everything to do with geopolitics.
China-US relations will shape the investment landscape for decades to come. Geopolitics has played a major role in shaping the hunger and anxiety of our times, fundamentally reshaping the way we invest.
What, then, lies at the heart of China's hunger and anxiety?
The Fourth Industrial Revolution is already underway, yet China has not fully overcome the technological shortcomings left by the Third. There is no time to lose.
This is why some people wonder: Why do Chinese computing chip companies command such high valuations when their technologies still lag so far behind NVIDIA's? Why does NVIDIA trade at just 50 times earnings, while a company hailed as "China's answer to NVIDIA" commands a multiple of 300?
To me, this gets the logic exactly backward.
It is precisely because these companies cannot catch up with NVIDIA in the near term that they command a higher strategic premium. The wider the technological gap, the greater the strategic value.
The further something lies beyond our reach, the stronger our hunger. The harder it is to catch up, the deeper our anxiety. If China were to achieve a complete breakthrough in computing chips one day, valuations might actually come down.
Where can one find China's most spectacular natural landscapes?
Much of the answer, I believe, lies in and around the Hengduan Mountains: the Meili Snow Mountains, Jade Dragon Snow Mountain, Mount Gongga, Mount Siguniang, Jiuzhaigou, and many others. Vast differences in elevation and deep fault lines have given rise to landscapes of extraordinary grandeur.
Hard-tech investing follows a similar logic.
Technological gaps, discontinuities in capabilities, and missing links in industrial systems: a leap in difficulty brings a leap in valuation, and a successful breakthrough can, in turn, bring a leap in returns.
This logic extends well beyond computing chips. It is equally evident in memory semiconductors, commercial spaceflight, and other sectors where China still faces substantial technological gaps with other countries.
It was precisely this conviction that led CoStone Capital, starting in 2016, to decisively focus its investments on three areas: hard tech, emerging industries, and life sciences and healthcare. In this context, "hard tech" refers specifically to important industries in which China faces a technological gap with the United States.
Thanks to this forward-looking strategy, CoStone Capital established an early presence across the full value chains of key sectors, including semiconductors, artificial intelligence, and robotics.
Looking ahead, the frontiers of technological progress and industrial upgrading are boundless. Nor can the gaps in hard technology be closed overnight. The twin windows of opportunity presented by technological innovation and the development of homegrown alternatives to foreign technologies have only just begun to open.
The road ahead is long, but the future holds immense promise.
As an investment firm, CoStone Capital will continue to invest where the hunger and anxiety of each era run deepest, move forward with the tensions that shape our times, and extend our reach toward the most challenging—and most important—frontiers.
Spring 2026
