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: https://people.pedaily.cn/201804/430010.shtml
Rewritten by Lu Ying, Edited by 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