2018.06.04 Noah Private Wealth Management Views:
When you truly understand a company，you should go straight to make an overweight investment in it.
Zhang Wei, Chairman of CoStone Capital
Zhang Wei, born in the late 1960s, stepped into the field of PE at the beginning of the 21st century and later founded CoStone Capital, one of the earliest venture capital firms in China. After 17-years’ development, CoStone has grown into a company with a total asset valuation of over 50 billion RMB. It has established over 60 funds and invested in more than 100 companies in total, among which 49 (44.5%) of them managed to enter into circulation or exit, and 28 (24.5%) of them succeeded in being listed through IPO or RTO.
In Shenzhen where PE flourishes, CoStone Capital occupies a leading position in this field in terms of either the exit ratio or the proportion of invested companies to be listed. That is why Zhang Wei and CoStone Capital are favored by many important VC prizes every year. More importantly, Zhang Wei has been listed in the Forbes list of China Best Venture Capitalists for three consecutive years.
His success relies on his philosophical thinking of three inherent problems: what does investment mean? Why we make such an investment decision? How to invest?
For the first question, Zhang Wei answers that investment means shooting the arrow at the target in the high value area.
He stresses that when you truly understand a company，you should go straight to make an overweight investment in it.
Since it was founded in 2001, CoStone Capital has only invested in a hundred companies or so, which is absolutely a small number compared with that of other PE firms. According to the statistics, CoStone’s average investment amount reached 40 million RMB in 2012, while that number of other VC firms was merely 10 million RMB or so. In 2016, CoStone’s average investment amount soared to 100 million RMB, and 70% of the portfolios received more than 50 million RMB investment.
Thus, it can be seen that CoStone makes a focused investment, which means it never waste its competitive forces on any non-strategic opportunities.
And Zhang Wei concluded his investment philosophy as grasp the main points and shoot the arrow at the target in the high value area. He neither puts his focus on everything nor blindly follows those overheated investment themes. Instead, Zhang Wei makes a focused investment, that is, making overweight investments in the companies he holds an optimistic attitude and even establishing a closer relationship with the invested companies through holdings.
When investing in Hubei Huitian New Materials Stock Co., LTD. (300041.SZ), CoStone found that this company had more than 300 shareholders, exceeding the 200 limited by China Securities Regulatory Commission (CSRC). Therefore, Zhang Wei decided to make a one-time purchase of all the stocks owned by those 300 shareholders and then resold them to 27 managers of the company to optimize the corporate governance structure. He even took over as the CEO of that company.
Zhang Wei said: “The key is that when you truly understand a company，you should go straight to make an overweight investment in it. In this way, you can establish a close relationship with the entrepreneurs, because you are holding over 20% of the shares, not just of single digits.”
In 2009, Hubei Huitian New Materials Stock Co., LTD. became one of the first companies being listed in the Growth Enterprise Market (GEM) of Shenzhen Stock Exchange. And Zhang Wei was awarded dozens of times for his investment in it.
This is part of the exclusive interview on Zhang Wei by Excellent Investors, a Chinese talk show where outstanding domestic investors will be invited to share their opinions and thoughts. For the full transcript, please refer to http://stonevc.com/news_view.aspx?Fid=t2:4:2&Id=698&TypeId=4&IsActiveTarget=True
Here is the interview video clip: https://new.qq.com/omn/20180531/20180531A1PD1Q.html
Rewritten by: Xu Xinru, 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