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Investment, Nothing to do with Macroeconomics: Macroeconomics, a Complex Issue Even to Economists, Let Alone Investors

2016.02.04 Zhang Wei Views:


Securities companies predict stock index annually, but they usually fail. Even in May, some of them still banged the drum for a rising stock market. Later in a speech, they said, “as we have predicted”. Well, they just skip all the wrong predictions.


Securities companies predict stock index annually, but they usually fail. Even in May, some of them still banged the drum for a rising stock market. Later in a speech, they said, “as we have predicted”. Well, they just skip all the wrong predictions.

However, even they were right about all indices, it is meaningless to investment decisions. Investors care about industries, which are on the rise, which are on the ebb. A successful company will bring us handsome paybacks in all economic periods, not the correct predictions on the stock market. It is the deep and accurate understanding of a company that helps us to realize excess profits even in economic fluctuations.

There are meaningful indicators to investment, for example, SDR’s inclusion of RMB and FDI. The former signals a recognition of RMB from the international financial market as a competent player as US dollars, euros, pounds, and yens, while the latter shows how foreign investors think about the Chinese market.

But as macroeconomics cannot explain China’s economic miracle, macroeconomics could be said as meaningless to our investment as well.

Traditional industries that are under the influence of macroeconomics have long been out of our portfolio. We now prefer healthcare, TMT, consumer products services. But the question is if these industries are beloved by all PEVC investors, how could CoStone make money?

So, “industry” is not the answer, the company is. No matter how specific the investor zooms into an industry, like the monoclonal antibody in cancer-targeted medical care or cardiovascular medicines for the aging population, they cannot make profits by the above answers only. A prosperous niche market is already crowded when you notice it.

That is my point, investment has nothing to do with macroeconomics or industrial fundamentals. It is all about companies.


The above is the second part of a speech titled “Investment, Nothing to do with Macroeconomics” by Zhang Wei in the 2016 CoStone Annual Meeting. Zhang holds that PEVC investment has nothing to do with the macro-economy, but everything about companies. Attention to macroeconomics will not lead to sensible investment. Sensible decisions are the results of a comprehensive judgment of a company’s potential growth and whether the company is overvalued or not.


For the whole speech, please visit

Rewritten by Chen Cong, Edited by Li Yunzhen, Du Zhixin

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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