2018.01.07 PEdaily Views:
With CEO Zhang Wei’s unremitting efforts over the past 15 years, CoStone Capital has grown from nothing to the scale it has today, with more than 40 funds under management, a total worth of over 30 billion yuan. In the industry, CoStone Capital is known for “would rather make a focused investment than a micro one.” Among over 90 enterprises that were invested by CoStone during the past 15 years, only one of them had a loss of principal. Zhang Wei attributed his key of success to “good luck and supports from decent friends”.
With CEO Zhang Wei’s unremitting efforts over the past 15 years, CoStone Capital has grown from nothing to the scale it has today, with more than 40 funds under management, a total worth of over 30 billion yuan. In the industry, CoStone Capital is known for “would rather make a focused investment than a micro one.” Among over 90 enterprises that were invested by CoStone during the past 15 years, only one of them had a loss of principal. Zhang Wei attributed his key of success to “good luck and supports from decent friends”.
Zhang Wei said: “I have invested in several portfolios that rewarded me a hundredfold each. That could not be made without capability, of course, but good luck has also played a significant role to some extent. My good luck is that I have met five decent friends during my investment career. Coincidentally, all of them are professors.”
The first one is Professor He Qinghua, CEO of Sunward Equipment Co., Ltd. (002097). As the Director of the Institute of Intelligent Machine of Central South University, Professor He founded Sunward, an equipment manufacturing company at his 54. Zhang Wei met Professor He in 2004. At that time, Sunward was evaluated four times in P/E ratio, but nobody dared to invest in it, as the engineering machinery industry was under huge influence of the government’s macro-control and there were already two big engineering machinery companies in Changsha, where Sunward based. However, Zhang Wei’s team made a decisive investment in it after careful investigation. Luckily, Sunward was listed on the Small and Medium Enterprise Board (SMEs Board) in December 2006, and rode the super bull market after the equity division reform, rewarding its investor 120 times in return.
CoStone made the judgment based on that: the macro-control was impermanent, and domestic infrastructure construction could enjoy at least five years of fast-growing period. Professor He, the founder of Sunward, had both technical background and entrepreneurship. What’s more, Sunward’s core product, “hydraulic static pile driver”, had won the second award of National Prize for Progress in Science and Technology and filled the gap in the market. It was very difficult to make a cash-and-carry deal in the field of engineering machinery, but Sunward made it. The four-times P/E ratio reflected its high margin of safety.
The second and third decent friends are Zhang Xiaocheng and Huang Bingliang, the two founders of Shandong Liuhe Group (000876), a feed company in Shandong Province. Liuhe Group was a star portfolio in Zhang Wei’s early investment career. In 2003, both gross profit and net profit in agriculture were very low, and “feed producing companies” were not favored by capital. But Zhang Wei saw that: first, Liuhe Group had its unique operation philosophy, that is, regarding itself as a “server for farmers” since the founding of the company, to carry out services marketing and provide whole industrial chain services to farmers; Second, high in operational efficiency, Liuhe strictly controlled its cost through intense development in a close distance and occupy the market on very narrow margins, which enabled it to reign supreme in Shandong Province; Third, as early as 2003, all middle-level cadres in Liuhe Group had acquired MBA or EMBA degrees, and the outstanding performers among them could earn millions a year.
“We found a great company and was rewarded 30 times in the end.” Up till today, Zhang Wei is still proud of that decision. It is proven to be a wise investment: Liuhe’s annual sales revenue was only 1.4 billion RMB when it received CoStone’s investment, but that rocketed up to 60 billion RMB in 2011, when it was listed in Shenzhen Stock Exchange through the stock-for-stock merge with New Hope Group (000876).
The fourth and fifth decent friends are Professor Peng Jianfeng (who recommended the Liuhe Group portfolio to Zhang Wei) and Professor Bao Zheng from the Renmin University of China. They are famous management scholars in China and the drafters of The Fundamental Law of Huawei. Zhang Wei said: “Two professors inspire me a lot in methodology, in particular knowledge about enterprise management. They teach me how to view the company from a manager’s perspective. I’ve learned that financial statements just show a result of the past, only the management system and entrepreneurship can represent the future of a company.”
Both Professor Peng and Professor Bao are under the profound influence of Peter Drucker. Upon their recommendation, Zhang Wei also becomes a follower of Drucker. “His ideas enlighten me and have changed my life. I will advise my loved ones reading Drucker’s book - Management Tasks, Responsibilities, Practices” Zhang Wei said.
Zhang Wei concluded: “It can be expected that investment in one company can receive several times in return through your hard works and ability. But hundred times of rewards cannot be achieved without good luck. If anyone says he attains hundredfold profits because he gains an insight into macroeconomy and capital market with his sharp investment horizon, that is nonsense.”
This is part of the interview with Zhang Wei on the “2017 PEdaily’s List of Top 100 Investors in China”. For the full transcript of the original Chinese interview, please refer to https://pe.pedaily.cn/201801/425728_all.shtml
Rewritten by Xu Xinru, 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