2020.05.29 CoStone Capital Views:
As for the mixed-ownership reform (MOR), Zhang Wei has set four personal investment creeds, including 1) don’t participate in the mixed-ownership reform of companies whose management does not hold shares, 2) don’t participate in the mixed-ownership reform of companies whose corporate governance has not been improved, 3) don’t participate in the mixed-ownership reform of companies with problems of domestic securitization, and 4) give priority to companies that have transferred the control. This is the 18th year that the investment team led by Zhang Wei has paid attention to the mixed-ownership reform of state-owned enterprises. The signals released during the two sessions in 2020 provide favorable policies for the further mixed-ownership reform of state-owned enterprises.
CoStone Capital Zhang Wei: MOR Rule-makers Shall Never be Rule-breakers
As for the mixed-ownership reform (MOR), Zhang Wei has set four personal investment creeds, including 1) don’t participate in the mixed-ownership reform of companies whose management does not hold shares, 2) don’t participate in the mixed-ownership reform of companies whose corporate governance has not been improved, 3) don’t participate in the mixed-ownership reform of companies with problems of domestic securitization, and 4) give priority to companies that have transferred the control. This is the 18th year that the investment team led by Zhang Wei has paid attention to the mixed-ownership reform of state-owned enterprises. The signals released during the two sessions in 2020 provide favorable policies for the further mixed-ownership reform of state-owned enterprises.
Many investors, including CoStone Capital Chairman Zhang Wei, hold that whether the bottleneck of the previous mixed-ownership reform can be broken is decided by both the macro-level policy support specifically for mixed-ownership reform and the actual measures essential to the reform of state-owned enterprises. And the reform of the property rights system is one of such measures. As an experienced investor who has participated in micro-level mixed-ownership reform for many years, Zhang Wei understands the key effects of the reform of the property rights system on the mixed-ownership reform of state-owned enterprises.
On May 29th, The Economic Observer had an interview with Zhang Wei. Against the backdrop in which state-owned enterprises have begun a new round of reforms, Zhang Wei still believes that “the core of reforming state-owned enterprises is to enable entrepreneurs to hold certain equity through the reform of the property rights system.” Being obsessed with protecting entrepreneurial spirit, he said that “I hope that regulators, investors and managers can be inspired, and especially hope that the rule-makers will not become rule-breakers.”
Rewritten by: Yang Yang, 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