2017.09.28 Zhang Wei Views:
We believe in the power of compound interest which makes small victories a greater one. We never predict the macro-economy, never adapt founders and their teams, never recreate business models. Our portfolio companies are not industrial giants, for that we do not favor the so-called tailwind or the public lover. The past two years saw 12 billion RMB investment from CoStone, among which 7 billion went to TMT.
We believe in the power of compound interest which makes small victories a greater one. We never predict the macro-economy, never adapt founders and their teams, never recreate business models. Our portfolio companies are not industrial giants, for that we do not favor the so-called tailwind or the public lover. The past two years saw 12 billion RMB investment from CoStone, among which 7 billion went to TMT.
CoStone prefers NEV and post-car market. In China, new cars are the mainstay which is reinforced by second-hand cars. But things are different in the US where second-hand cars are the mainstream. Just like sellers of new houses are more accessible to financial support from banks, so do new cars. But when China steps into the era of second-hand cars, there will be a great number of opportunities for private financial institutes.
Franchised pharmacies are also our favorites. China’s 440,000 pharmacies are usually not franchised as in the US. The largest Chinese franchised pharmacy only has several thousand stores. But in the US, this industry’s CR3 ratio of market share is as high as 80%. In this context, the separation of medicine and doctors, management of chronic diseases, community-based medical care will see huge potential in integration and growth.
In terms of AI, we invested in SenseTime recently. SenseTime has independent technologies at the operating system, not just application. 120 SenseTime scientific researchers have established as an ecological system. Facial recognition is only a starting point of SenseTime’s commercialization journey. The founder of SenseTime is a practical scientist and entrepreneur. That’s why we invested in this company so heavily.
The above is part of the speech -- “Investment opportunities, from 1 to N” delivered by Zhang Wei, CEO of CoStone, on the “11th China Investment Annual Meeting – LP Summit”, host by ChinaVenture Group, opened in Shenzhen from September 25th to 26th, 2017 under the theme of “China, Reshaping the Global Landscape”.
Rewritten by Chen Cong, Edited by Li Yunzhen, Du Zhixin
The year 2019 marks the fortieth anniversary of China’s Reform &Opening-Up, once again, we meet at the turning point of history. What’s the next step for the game, is there any clear guidance? The answer is affirmative.
Our country is enjoying a good momentum of development, which does not come from the Washington Consensus nor the Beijing Consensus. China’s experience has proved that both the visible hand and the invisible hand are crucial: the visible hand, stands for the government-led reform, and would yield benefits for reform and opening up; the invisible hand, stands for the Marginal Power represented by the private sector, and would improve economic efficiency and tax collection, create jobs and employment opportunities.
Provided that we want to protect and expand the benefits form reform, three simple but mandatory agreements are to be made and followed: No.1 Private ownership must be recognized, protected and treated equally with public ownership constitutionally, both ownerships are scared and inviolable;No.2 Make further clarification of the principal position of market economy, “deepen economic system reform by centering on the decisive role of the market in allocating resources”, as President Xi addressed in the third Plenary Session of the 18th CPC Central Committee;No.3 Implement the guiding principles of “comprehensively promoting law-based governance” of the fourth plenum. The rule of law is essential for economic growth, irreplaceable to protect private ownership, and necessary to encourage innovation and entrepreneurship.
Above are three rules for us to avoid falling into the Middle-income Trap. Assuming that we are breaking systematic barriers to private enterprises’ participation in market economy, and boosting innovation and entrepreneurship of our society, then we are heading towards a promoting direction. We are marching in the path of light, regardless of the ups and downs of Sino-US relationship, the drop in GDP growth rate, or the monetary policy.
These principals also apply on knowing how better to run a business: don’t be hedged by rules and regulations at the beginning, pay more attention to your survival, and you’ll learn more when you start your second business.
For many years, Huawei has been the only Chinese company on the list of the Top 50 R&D Spenders. Regardless of the economy and its income, what Huawei has been doing is investing in its future, dedicated to R&D, continuously and resolutely. This provisional work underscores Huawei’s accomplishments, making Huawei anindustry leader.
So, there are standard answers on how to run a company,which could be summarized as concentration and professional dedication, continuous investment on innovation and trying harder in R&D. Entrepreneurship is also important, every single company needs entrepreneurs to push aside all obstacles and difficulties, to implement strategies and ideas. We, as investors, are destined to look for such outstanding entrepreneurs and their companies, invest in them and partner with them.
At this key point of history, a country, a company, or asingle individual, will all need to find the right path. Four decades after the Reform and Opening-up, it’s time to learn from our experience and stop “wadding across
