2019.04.29 Wang Xin Views:
On CoStone Capital’s annual conference on April 28th, CoStone Capital Zhang Wei provided a perspective that the upcoming Sci-tech Innovation Board (STAR Market) is another great practice of asymmetric competition in China’s capital market.
On CoStone Capital’s annual conference on April 28th, CoStone Capital Zhang Wei provided a perspective that the upcoming Sci-tech Innovation Board (STAR Market) is another great practice of asymmetric competition in China’s capital market.
In Zhang Wei’s opinion, the fact that the American economy is so powerful and vigorous is related to the highly developed direct financing system to which Nasdaq has made great contributions. China is now launching the STAR Market, and the timing is just right. The Board will be the engine of China's next round of innovation-driven economy.
The so-called asymmetric competition refers to the phenomenon that companies with very different strengths compete in asymmetric or different ways in a market where there are asymmetric restrictions and incentives. The question it is trying to answer is increasingly important and pressing: in the context of a globalized economy and an open market with the big trend of many industries overshadowed by oligopolies, do local companies which are weak and at a disadvantage still have a chance to grow and how?
As an investor who has been active in VC for the last 18 years, Zhang Wei has a profound understanding of the environment where Chinese tech companies develop. Take a look at the relationship between financial market and innovation. China’s direct financing is much less than that in the U.S, while innovation is highly related to direct financing and stock market is the vital link of it.
The Sci-tech Innovation Board will hugely enhance direct financing for original technology and innovative tech companies, and speed up the development of original, hardcore technologies in China. The launch of the Board and the registration-based IPO system will help to relieve the financial stress of domestic tech companies at their early-stage and extend their lifetime.
In the case of the US, Nasdaq started out as an active supporter for American small businesses. Nasdaq and Silicon Valley were supportive to each other in the 1980s and 1990s, establishing America’s large lead in global sci-tech industry in the new age. On the one hand, Nasdaq attracted the capital into high-tech fields and provided financial support for SMEs, boosting the technological innovation of companies. On the other hand, high-tech had become the new driver for the economy and promoted industrial upgrading.
Above are the excerpts of Zhang Wei’s speech at 2019 CoStone Capital Investor Annual Conference reported on Shenzhen Special Zone Daily. Access to the original article in Chinese: http://stonevc.com/news_view.aspx?TypeId=5&Id=756&Fid=t2:5:2
Rewritten by Lu Ying, 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