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
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