2019.05.21 Chen Shudong Views:
“So, it is easy for companies like Alibaba and Tencent to take off in a short time and become one of the world leaders. But it is difficult for hard tech companies in China. Therefore, the success of HUAWEI is bigger.” Zhang Wei added.
Zhang Wei: CoStone Capital Zhang Wei: HUAWEI, A Success Bigger Than Alibaba and Tencent
How to be a top investor and build an excellent enterprise? Zhang Wei, chairman of CoStone Capital, found the answer. He believed that an accomplished company must have clear strategies and entrepreneurship, coupled with corresponding structures, confidence and perseverance.
He indicated that hard technology sector should be highly valued, due to China’s inevitable attention on innovation and start-ups. Money-losing companies could go public in the STAR market technically. Because the hard tech companies needed more time and investment to succeed than the Internet companies. HUAWEI made itself an unparalleled and world-class company through long-term growth, instead of taking advantage of a new business model. That was why the success of HUAWEI was bigger than that of Alibaba and Tencent. HUAWEI was the one and only Chinese enterprise on the list of the Top 50 R&D Spenders. BAT (Baidu, Alibaba and Tencent) and other enterprises played catch-up with Amazon, Google, Facebook and other innovative and original companies, and had gone so well. However, they failed to invest enough into R&D and spark innovation.
“So, it is easy for companies like Alibaba and Tencent to take off in a short time and become one of the world leaders. But it is difficult for hard tech companies in China. Therefore, the success of HUAWEI is bigger.” Zhang Wei added.
CoStone Asset Management Co., Ltd, founded in 2001, by Zhang Wei, is a profound private equity investment firm with over 18-years of experience in investment management, and it is known to be one of the earliest private equity investment firms in China. CoStone has invested in 120 outstanding projects in TMT, healthcare, media & entertainment, consumer & retail fields, including core-tech companies like SenseTime and Royole, with a total asset valuation of over 50 billion RMB under its management. CoStone now has made 50 exits and 60% of those companies have gone public.
Above: Excerpt of Zhang Wei’s keynote speech in the 7th China Entrepreneurship and Investment Summit held on May 17. Please refer to this link to view the speech in full: http://stonevc.com/news_view.aspx?TypeId=5&Id=769&Fid=t2:5:2
Rewritten by: Luo Xinying, 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