2016.04.14 CoStone Capital Views:
April 14, 2016
Themed with "Leapfrogging", CoStone Annual Meeting 2016 kicked off at Sheraton Dameisha Resort Hotel Shenzhen, Guangdong on April 4. The two-day annual meeting attracted hundreds of investors, scholars and entrepreneurs to discuss the issues of investment opportunities in a downturn, China's middle-income trap, opportunities and challenges faced by the industrial internet, entrepreneurs' responsibilities and the current domestic and international order.
Zhang Wei, Chairman of CoStone Capital, Xu Xiaonian, Professor of Economics and Finance at China Europe International Business School (CEIBS), Peng Jianfeng, Professor and PhD Supervisor at Renmin University of China (RUC), Tai Hongwei, Founder and Executive Dean of Winku Business School, Zhang Ming, Professor and PhD Supervisor at RUC, Xu Jilin, Professor and PhD Supervisor at East China Normal University, and Wang Shi, Founder and Chairman of Vanke, gave wonderful speeches at the meeting.
Vanke Chairman Wang Shi making a speech
Wang Shi's speech was closely related to the theme of "Leapfrogging", which, in his opinion, concerns both individuals and enterprises. For him as an individual, he has leapfrogged himself by doing sports such as mountaineering, rowing and marathon, which get his body and mind to be healthier than before. And for enterprises to get rid of the flaws of family businesses and SOEs and realize a leapfrog development, the only way he believed is to adopt a management model of mixed ownership. "Enterprises in Shenzhen should combine the advantages of state, foreign and private ownership in the future," added Wang Shi.
Speaker
Wang Shi
Wang Shi is Founder and Honorary Chairman of China Vanke Co., Ltd. He used to serve as Executive Director of the One Foundation and Shenzhen Mangrove Wetlands Conservation Foundation and Chairman of China Entrepreneurs Forum. With a global vision of environmental sustainability, he sits on the World Economic Forum's Global Agenda Council on Governance for Sustainability, with particular focus on forests, biodiversity and climate change. Wang Shi is a visiting fellow at the University of Cambridge, specializing in business values and ethics. He has teaching roles at numerous universities, including Harvard, Peking, Columbia, MIT, HKUST, and the National University of Singapore.
Rewritten by: Jiang Xiaomei, Edited by: Du Zhixin, Wei Yiyi
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