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CoStone Capital Zhang Wei: Avoiding Mediocrity

2018.04.16 Liu Quan Views:


On April 14th, Zhang Wei delivered a keynote speech titled "Avoiding Mediocrity" at the CoStone Capital 2018 Annual LP Conference. By reviewing the history of CoStone Capital, he explained how to avoid mediocrity as a company as well as an investment firm.

On April 14th, Zhang Wei delivered a keynote speech titled "Avoiding Mediocrity" at the CoStone Capital 2018 Annual LP Conference. By reviewing the history of CoStone Capital, he explained how to avoid mediocrity as a company as well as an investment firm.


One line in Huawei’s ads hit Zhang Wei — Don't waste your strength on dispensable opportunities. This comes from a story of World War II. In 1940, German forces invaded France—not along the Maginot Line, which the Allies had expected, but through the Ardennes Forest, moving steadily along the Somme Valley toward the English Channel. Similarly, Huawei has also been sticking to its own main course over the years, and it has never strayed off. Companies should choose their own path carefully and stick to it. 


In Zhang Wei's view, there are six components to corporate growth: industrial cycle, industrial structure and technological progress, entrepreneurial spirit, corporate governance, and organizational system. It takes hard work to figure out these issues. You need to study the history of industrial development, the long-term ecological chain and industrial chain of the entire enterprise.


CoStone Capital never jumps on the bandwagon or bets on the track. We would prefer to see more companies getting off the beaten track instead of following suit.


In recent years, CoStone Capital has started making its way into buyout. The success of a buyout depends largely on the understanding of corporate governance. Zhang Wei believes that it is necessary to fully understand the complexity of corporate governance in a positive way, use different methods to get along with it, structure your plans systematically, and act decisively.


Over the years, Zhang Wei has learned one thing: there is a slim chance to meet a good corporate team. As an investor, you should consider yourself very lucky if you happen to work with good managers.


Above are the excerpts from PEDaily. Access to full article in Chinese:


Rewritten by Lu Ying, Edited by 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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