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Zhang Wei from CoStone Capital suggests that Shenzhen should focus on the development of technology and support private enterprises.



On May 12th, at the Urban High-Quality Development Forum during the Shenzhen International Venture Capital Festival, Chairman of CoStone Capital, Zhang Wei, emphasized the importance of supporting and developing technology, represented by the semiconductor industry, and prioritizing support for private enterprises due to the increasingly fierce global technological competition.

Zhang Wei believes that Shenzhen currently does not have a competitive advantage in the field of semiconductor technology, during the global and national technology race. However, with a long and high-value semiconductor supply chain, it serves as the "brain" of the modern electronics industry, with every dollar of output driving $100 of GDP, without any shortcuts for overtaking. From the underlying logic of semiconductor investment, the Fourth Industrial Revolution can’t be achieved without semiconductor technology. The competition between China and the United States in the field of technology will further motivate China to strive for self-reliance and promote innovation solutions through a national approach. Zhang Wei emphasized that when an investment aligns with both technological progress and policy guidance, its valuation will transcend traditional financial models. Hence, the reshaping of China's semiconductor industry investment logic is derived from the intense Sino-U.S. technology competition, presenting future investment opportunities in areas where China lags behind in semiconductors.

Zhang Wei revealed that CoStone Capital has established a top-to-bottom comprehensive investment layout in the semiconductor industry chain. Invested companies such as GALAXYCORE,Changxin Memory Technologies,Inc,Birentech, SHOULDER ELEC,INNOSILICON, and UNITED FAITHFUL CREATIVE TEAM, cover the entire industry chain from raw materials, design, packaging and testing, manufacturing, and extend to semiconductor distribution. CoStone Capital has become an "industry chain organizer" in the semiconductor sector. Up to now, CoStone Capital has invested in 53 companies in the semiconductor field, including 28 in design, 13 in equipment, 5 in materials, 3 in packaging, 2 in distribution, 1 in EDA and IP, and 1 in IDM.

Regarding the development of the semiconductor industry in Shenzhen, Zhang Wei suggested focusing on attracting industry leaders and key enterprises in the supply chain, nurturing and fostering leading enterprises in various segments. Specifically, he emphasized the need to cultivate and support several types of leading enterprises, such as semiconductor foundry companies represented by Hefei Changxin and integrated IDM companies, mainstream CPU/GPU and high-performance chip design companies, chip design companies for automotive and industrial applications, including various sensor chips, power and power chips, analog and communication chips, as well as semiconductor equipment, materials, and software platform companies.

Zhang Wei also stated the unique qualities of Shenzhen, characterized by a non-submissive relationship between the government and the people. This has led to the prosperous development of private enterprises and the private economy in Shenzhen, with private enterprises accounting for over 96% of the total number of enterprises in the city. Shenzhen has witnessed the rise of private enterprises in every technological wave, such as Tencent in the internet era, Huawei and ZTE in the telecommunications era, and BYD in the era of new energy vehicles.Zhang Wei suggests that Shenzhen should assume responsibility, gather resources, support private enterprises, and explore and protect entrepreneurs. In terms of industrial planning, long-term and systematic layout should be adopted, similar to what has been done in Hefei, where a blueprint is fully implemented. In terms of institutional mechanisms, both the national system and market-oriented decentralization should be explored and emphasized. Compared to a national system, mass innovation is more dynamic.

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


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