2019.04.21 CoStone Capital Views:
April 9, 2017
CoStone Annual Meeting 2017 made a hit in Sanya, Hainan from April 8 to 9. The theme was "Navigating Through the Fog". After three decades of rapid growth, China has entered a "fog" where the economy is declining and plagued by government debts, non-performing loans in banks and overcapacity. Moreover, the deteriorating business environment, a weak real economy driven by investment and the complex international situation have caused more uncertainties. Will the "fog" disperse? Can we get out of the middle-income trap? How do we keep moving forward?
CoStone Annual Meeting 2017- Navigating Through the Fog
To answer the questions, Zhang Wei, Chairman of CoStone Capital, Wen Pengcheng, Founder of Wens Foodstuff Group, Ma Xiuhui, CEO of Opple Lighting, Peng Jianfeng, Professor at Renmin University of China, Tang Xiao'ou, Professor at the Chinese University of Hong Kong, Shi Wei, a chief expert of China Stone Consultant, Gong Pengcheng, Professor at Peking University, and Chen Zhiwu, Tenured Professor at Yale University, gathered at the meeting to share their insights.
Entrepreneurs Forum-Growth of Enterprises Under Uncertainties
At the same time, the Entrepreneurs Forum witnessed heated discussions on the development of healthcare, TMT, culture & entertainment, and other emerging industries. Entrepreneurs from these industries made informative speeches. Wu Xinghua, Chairman of Quanyi Health, Cheng Minghe, President of Mindray Bio-Medical, Yuan Yuyu, Chairman of MedPlast HealthCare, Sun Jianhua, Chairman of Sino Medical, Xu Li, President of SenseTime, Liu Zihong, Chairman of Royole, Zou Xiaowu, Chairman of Easy Click Worldwide, Ma Dong, Founder of Mewe Media, Zeng Rong, Founder of Houghton Street Media, and Ding Feng, Founder of Ergeng Network, were among them.
Chairman Zhang Wei making a speech
Chairman Zhang Wei expressed that innovation and entrepreneurship would be the only way for China to get out of the "fog". It means to encourage people to do business creatively and drive innovation in Premier Li Keqiang's words. Chairman Zhang emphasized that CoStone Capital has always been optimistic about the investment in China. The rise of a large-scale middle class has brought a great transformation to the consumption structure and growth mode in China. New forms of consumption are booming and the industrial upgrading is under way. "Over the past two years, CoStone Capital has made a total of $10b investment, with more than $6b put in the PE/VC industry. Our portfolio represents China's new economy, which has been the major driver of the entire economy," he said.
Speaker
Prof. Peng Jianfeng
Peng Jianfeng is Professor and Supervisor at Renmin University of China, Chairman of China Stone Management Consulting Group, Deputy Director of China Enterprise Confederation Management Consulting Committee, Vice President of Beijing Enterprise Directors Association, and a famous management consulting expert in China. Prof. Peng used to be Vice President of the School of Labor and Human Resources of RUC. He has been engaged in the consulting and research work on HR management and corporate culture for a long time. He also provides consulting services for enterprises. He has been hired as a senior management consultant and a team leader by Huawei and TCL successively. The team led by him has consulted for dozens of famous enterprises, with the results of Huawei Basic Law, OCT Charter, TCL: Defeat Scale with Speed, Samsung (China) Culture and Dongfeng Nissan Programme of Action.
Prof. Tang Xiao'ou
Prof. Tang Xiao'ou received his bachelor's degree from the University of Science and Technology of China, Hefei, in 1990, a master's degree from the University of Rochester, Rochester, NY, in 1991, and a PhD degree from the Massachusetts Institute of Technology, Cambridge, in 1996. He is Professor at the Department of Information Engineering and Associate Dean (Research) of the Faculty of Engineering at the Chinese University of Hong Kong. He worked as the group manager of the Visual Computing Group at the Microsoft Research Asia from 2005 to 2008. His research interests include computer vision, pattern recognition, and video processing. Prof. Tang received the Best Paper Award at the IEEE Conference on Computer Vision and Pattern Recognition (CVPR) 2009. He is a program chair of the IEEE International Conference on Computer Vision (ICCV) 2009 and has served as Associate Editor of IEEE Transactions on Pattern Analysis and Machine Intelligence (PAMI) and International Journal of Computer Vision (IJCV). He is a fellow of IEEE.
Prof. Shi Wei
Shi Wei is a researcher and Chief Consultant at the Finance and Securities Institute of RUC. He has been engaged in enterprise management consulting since 1995, specializing in marketing and enterprise strategy. He has served TCL, Midea Group, Giti Tire, Motorola, Liuhe Group, Robust Group, CIMC, Telling Telecom and SPD Bank. He also provides management trainings for many enterprises in China, which have been well received.
Prof. Gong Pengcheng
Prof. Gong Pengcheng, a famous scholar and thinker, was born in Taipei, Taiwan. He earned his PhD from the Research Institute of Chinese Language and Literature, National Taiwan Normal University. He was Dean of the College of Liberal Arts, Tamkang University, Founding President of Nanhua University and Fo Guang University, and President of Eurasian University, USA. He is the recipient of the Zhongshan Literature and Art Award. He served as Professor at Beijing Normal University, Tsinghua University, Nanjing Normal University after 2004. Now he is Professor at the Department of Chinese Language and Literature, Peking University.
Prof. Chen Zhiwu
Prof. Chen Zhiwu graduated from Central South University in 1983 with a bachelor's degree. Later he obtained a master's degree from the Changsha Institute of Technology in 1986 and a PhD from Yale University in 1990. Prof. Chen is Director of the Asia Global Institute (AGI), Chair Professor of Finance and Victor and William Fung Professor in Economics at the University of Hong Kong. He is a former professor at Yale University (1999-2017). His research covers finance theory, the sociology of finance, economic history, quantitative history, emerging markets, as well as China's economy and capital markets. He was also a Special-Term Visiting Professor at Peking University (School of Economics) and Tsinghua University (School of Social Sciences).
Rewritten by: Jiang Xiaomei, Edited by: Du Zhixin, Wei Yiyi
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