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
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