2018.01.19 Zhang Wei Views:
China has grown into the world’s second largest economy over the past 40 years. In this period, many Chinese technology companies represented by Huawei and Alibaba have become world-class corporations, which provide robust support for economic transformation and upgrading. At present, China is equipped with three conditions for extensive tech innovation: market, capital and talents. Huge opportunities for technological innovation are emerging in China.
China has grown into the world’s second largest economy over the past 40 years. In this period, many Chinese technology companies represented by Huawei and Alibaba have become world-class corporations, which provide robust support for economic transformation and upgrading. At present, China is equipped with three conditions for extensive tech innovation: market, capital and talents. Huge opportunities for technological innovation are emerging in China.
As early as two years ago, we have found that AI was truly given new development opportunities accompanied by the rise of big data technology. It is the technological strength and development stage of China and the United States that are almost similar in AI, which gives us the advantageous opportunity to enter the track first. At the beginning of 2017, we invested in SenseTime, a leading AI unicorn in China or even the world.
Through the new energy automobile vehicle (NEV) industry chain, we can see the broad development space of this industry. Data shows that from 2011 to 2016, China's NEV sales increased from less than 5,000 to 510,000, while car owners rose from 10,000 to 1 million. China's NEV will enter a period of rapid growth after 2020. The production and sales volume of NEV in 2025 is expected to reach 8 million. In 2030, the number is expected to reach 40% of total vehicle sales, about 15 million.
China’s electronic information technology(EIT) ranks top in the world, but still has obvious shortcomings in anatomy, such as the integrated circuit(IC) industry. Fortunately, we can also see the country's strategic layout in the meantime. After many years of continuous large-scale investment in China, Chinese display manufacturer such as BOE(000725.SH) and China Star Optoelectronics have begun to occupy leading positions in the world since 2017. We believe that the IC industry is emerging like the display industry.
As Huawei CEO Ren Zhengfei said, in the era of big opportunities, don't be opportunistic. We have witnessed that Huawei has become a world-class enterprise in communications after decades of continuous investment. And we believe that China's science and technology will rise further along with the strong momentum of China's economic transformation and in terms of overall national strength.
In the next decade, a number of technologically innovative companies will emerge in China. What we investors can do is grow with these companies.
Written by Zhang Wei, the original article was published in China Securities Times. Read the full article in Chinese, please check :http://stonevc.com/news_view.aspx?TypeId=5&Id=669&Fid=t2:5:2
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