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Zhang Wei from CoStone Capital:comprehensive Registration System Will Further Optimize the ecosystem of Venture Capital Investment



The implementation of a comprehensive registration system will further streamline the "fund-raising, investment, management, and exit" process, enhancing the capital turnover efficiency for venture capital institutions. This will provide smoother liquidity for venture capital funds and facilitate a virtuous cycle between technological innovation and capital formation. Additionally, it will optimize the collaborative linkage between entrepreneurship, innovation, and venture capital, further improving the exit environment for private equity and venture capital investments. Venture capital institutions should adhere to the principles of investing early, investing in small-scale projects, and investing in technology, in order to create an enterprise service ecosystem that spans the entire life cycle and value chain. Through in-depth research on investment targets within the industry chain, they can truly discover high-quality projects with growth potential, innovation, and technological content.

The relevant rules and regulations for the full implementation of the stock issuance registration system have been officially published and implemented recently. What changes will occur in the primary market ecosystem under the comprehensive registration system? What opportunities and challenges will the new regulatory rules bring? How should venture capital institutions adapt to the new primary market ecosystem? Zhang Wei, Chairman of CoStone Capital, participated in the discussion on these topics at the "Shanghai Securities Roundtable.''

Shanghai Securities Journal: What changes will the implementation of the comprehensive registration system bring to the primary market ecosystem?

Zhang Wei: The formal implementation of the comprehensive registration system is a "ceremony" for the A-share market. This means that the phase in which venture capital institutions can profit from investing in listed companies has ended. Under the comprehensive registration system, the valuations in the secondary market will show a trend of polarization, which will push primary market investment institutions to be more cautious in selecting targets, continuously improving their industry awareness, professional capabilities, and risk control abilities.

At the same time, there will be a further strengthening of the trend of investing early, investing in small-scale projects, and investing in technology, which will be conducive to supporting small and medium-sized enterprises and startups, as well as the implementation of an innovation-driven development strategy.

Shanghai Securities Journal: The conditions for the listing of unprofitable companies on the ChiNext board are already mature. What impact will this have on the primary market? What changes will occur in the investment logic of venture capital institutions?

Zhang Wei: Venture capital institutions have relatively strict standards for investing in unprofitable companies and are relatively cautious. Overall, the sectors where venture capital institutions invest in unprofitable companies will probably still be mainly the Sci-Tech Innovation board and the ChiNext board.

Shanghai Securities Journal: How will the implementation of the overseas listing filing management rules impact venture capital institutions?

Zhang Wei: It is worth noting that there is a significant difference in valuation levels between different markets. Generally, the valuation level in the A-share market is higher than that in the US and Hong Kong stock markets. However, some industries' enterprises are more suitable for listing overseas to enjoy higher valuations. Venture capital institutions focus on investment returns. The choice of which market to list on is also an important reference factor for venture capital institutions when making investment decisions.

Shanghai Securities Journal: What opportunities and challenges will the implementation of the comprehensive registration system bring to venture capital institutions participating in the primary market?

Zhang Wei: Under the comprehensive registration system, the A-share market will become more transparent and market-oriented. We look forward to further clarifying the standard information regarding issuance prices, issuance sizes, issuance timing, and so on. Domestic venture capital institutions need to gradually benchmark against leading institutions in mature foreign markets and adopt more mature thinking when it comes to investment and exit to enhance their ability to discover and create value.

Shanghai Securities Journal: What areas should venture capital institutions focus on in preparation for the full implementation of the comprehensive registration system?

Zhang Wei: Leading venture capital institutions have made preparations and will adjust their investment strategies in accordance with the requirements of the comprehensive registration system:

Firstly, discovering value. Venture capital institutions need to invest even earlier, in smaller-scale projects, and in technology, which places higher demands on their ability to grasp the growth potential of enterprises. Especially when investing in early-stage tech companies, it tests their ability to understand technological development trends and the commercialization of cutting-edge technology.

Secondly, creating value. Venture capital institutions need to improve their post-investment service capabilities and further empower the companies they invest in. They need to undergo a mindset shift from merely collecting to cultivating, from fishing to fish farming, deeply cultivating industries with a few players but vast market potential, evident advantages, and accumulated experience.


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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