2018.04.16 Zhang Guofeng Views:
China has surely entered a post-industrialized society with an increase in the middle class. Under such social background, how should investment firms seize the opportunities? Which areas are really worth paying attention to? What is the method of investment? At today’s 2018 CoStone Capital Investor Annual Conference, Chairman Zhang Wei had given CoStone’s answers to these questions.
China has surely entered a post-industrialized society with an increase in the middle class. Under such social background, how should investment firms seize the opportunities? Which areas are really worth paying attention to? What is the method of investment? At today’s 2018 CoStone Capital Investor Annual Conference, Chairman Zhang Wei had given CoStone’s answers to these questions.
CoStone Capital Zhang Wei
As far as CoStone Capital is concerned, to evaluate a company is to make sense of the critical drivers of the structure of industrial competition and corporate growth, including entrepreneurship, corporate management and organizational system. Zhang Wei pointed out investors need to realize that a full understanding of a company needs to go a bit more in width and depth. This is especially true when looking at an industry. Only if you get a deeper understanding and insight of the history of the industry, its companies around the world and the upstream and downstream of the industrial chain can you have a much better picture of the single company.
As for the principle of investing, Zhang Wei stressed again that CoStone Capital neither chase trends nor bet on the racetrack. This is a consensus within CoStone Capital: trends fade easily, and racetracks that catch on to the trend are usually crowded and the companies on those racetracks also have high valuations. He emphasized that volatility in the market is hard to grasp but the situation of the company itself is visible and tangible.
In terms of investment environment, Zhang Wei said the rapid growth of internet economy and e-business has made profound changes in China’s society. From the looks of things in capital market, the implementation of the quasi-registration system is rebuilding the investment order.
CoStone Capital has long been committing itself in PE/VC since its founding in 2001. But at this point, managers led by Zhang Wei are trying to extend to more areas like LBO. After they’ve learned some costly lessons, the management team figured out that the success of a buyout depends largely upon the understanding of the corporate management. Meanwhile, Zhang Wei said that from the perspective of a buyout, cross-border M&A is a rite of passage for Chinese companies.
In the new chapter of PE Buyout investments, chain pharmacies and new energy vehicles (NEV) are CoStone’s favorite important areas. He decided that NEV is the big trend of global whole vehicle.
As an ordinary company, Zhang Wei said, CoStone Capital has its own expectations and missions. He believed the meaning of investment firms is to solve social issues in a commercial way and become a social company.
Above are excerpts from Securities Times. Access to full text in Chines: https://baijiahao.baidu.com/s?id=1597730901596099985&wfr=spider&for=pc
Rewritten by Lu Ying, Edited by Du Zhixin, Li Yunzhen
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
