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CoStone Capital Zhang Wei: The Sci-tech Innovation Board Is A Great Practice of Asymmetric Competition in Capital Market

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.

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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:

Rewritten by Lu Ying, Edited by Du Zhixin, Li Yunzhen

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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