On December 6, the 8th Zhitong Financial Capital Market Annual Conference was held in Shenzhen, at the meeting, Mr. Zheng Weihe, founding partner and chairman of Tongchuangweiye, said that there is no need to be overly pessimistic about China's economy, China is still a part of the world, China still maintains a huge growth rate and a certain growth rate, in addition to China's most important strength: 1.4 billion people, 400 million middle class, tens of millions of scientists and engineers, tens of millions of entrepreneurs and many lovely shareholders. At the same time, he also said that it is necessary to reduce growth expectations and maintain sufficient cash flow to keep pace with national policies.
The following is the full text of Mr. Zheng Weihe's speech:
Macro environment observation and thinking
Since the beginning of this year, technological change, economic transformation and financial transformation have brought new changes to China's economy. The U.S. economy remains strong, Treasury yields have climbed sharply, reaching as high as 5%, the U.S. dollar has appreciated, and U.S. stocks have continued to strengthen. China's GDP decline, the slowdown in the rate of surplus and demographic changes, especially the major adjustment brought about by real estate, have had a very big impact on China's economy. In addition, the external environment of the Sino-US war, the Russia-Ukraine war, and the tightening of some regulatory policies in China have led to the economy falling short of expectations, and the confidence of international investors in China has also declined.
But at present, various risks have reached a greater release. We have paid attention to some characteristics of differentiation, first of all, there is a differentiation between state-owned investment and non-governmental investment, the proportion of state-owned investment has maintained a certain growth rate, private investment is declining sharply, the profits of state-owned enterprises are growing positively, and the profits of private capital and foreign capital are declining, and the reason behind this is that most of the state-owned capital is concentrated in public utilities.
The second is the differentiation of emerging fields and traditional fields, such as new energy vehicles and other fields, China's performance is very prominent, on the contrary, real estate education and other declines, especially this year, I think there are several major events worth paying attention to in the economic field, such as Huawei chips have achieved breakthroughs and accelerated domestic substitution;China's new energy vehicles or the entire automotive industry, China has surpassed Japan in terms of exports, becoming the world's largest exporter. In addition, Pinduoduo's market value surpassed that of Alibaba last week, and ByteDance's revenue exceeded Tencent's ......At the current point in time, China is undergoing a change in the replacement of the old with the new, and new forces are gradually rising.
In fact, the development of China's economy also needs to strengthen our own internal strength, in terms of scientific and technological innovation, the first investment, scientific research enterprise technology application innovation, financial institutions of venture capital support of the "troika" is indispensable, we judge the support for venture capital, next year there will be a new upgrade, banks, insurance companies and other major institutions will also further open up support for venture capital. I think there will be more policy support for scientific and technological innovation next year, which is worth looking forward to.
There is also a very important phenomenon this year, that is, all localities are working hard to attract investment and innovate. In the words of Mr. ***, in addition to entrepreneurs, local ** is also a very important innovation force in China.
China does still have a lot of resilience and advantages as a major country that is worth optimism: institutional advantages, lane change and overtaking advantages, and the advantages of the most growing middle- and high-income groups, ......Recently, the middle class, especially Internet companies, is under greater pressure to lay off employees, but the engineer dividend still exists. Another important advantage is the capital market dividend, which will be analyzed later, and Shenzhen and Shanghai are still the largest IPO markets in the world.
In addition, from a macro point of view, the health of the banking system and the overall stability of the capital market mean that the basic economic quality of a country is still relatively good. There is a point that I find very interesting, in recent years, we have done a lot of subtraction in traditional fields, such as real estate and education, but our economy is still growing at 5%, which is already a miracle. China's real estate contributed 37% negative growth, on the contrary, the green economy and the digital economy brought 47% positive growth. China occupies a very large share in the world in solar energy, electromagnetic panels, drones, high-speed rail, lithium batteries, wind power generation, robots, e-commerce, machine tool production, electric vehicle exports, shipbuilding, etc., which is only a part of it, and some basic components of China's new economy are still very competitive in the world.
One of the core factors of the success of the United States is the active capital market, which is why we need to pay attention to finance and capital markets now. Although the market is still fragile, the bottom characteristics of the economy are already very clear.
Investment & Exit Observation
Let's talk about the observation of the market, the Hang Seng Index from the past four years, are the lower shadow, more interesting is this year at this point is the lowest point of the Hang Seng Index, on the contrary, last year, the year before there is a very long lower shadow, and last year erased the lower shadow line should be the end of October and early November. I think it's quite possible that there will be a head-up in December this year.
Judging from the performance of A-shares throughout the year, it also did not meet expectations, and the battle for the 3,000-point defense of the Shanghai Composite Index was fierce, and most of the major indexes fell sharply, especially the Shenzhen ChiNext Board.
As venture capital institutions, we are more concerned about the trend of IPOs. On the whole, 263 IPOs have been listed on the A** market so far, compared with 350 last year, a decline, and the scale of financing has weakened, but the Shanghai Stock Exchange and the Shenzhen Stock Exchange are still firmly ranked first and second in the global new stock financing ranking, and the new stock breakage rate is low. The number of Hong Kong stocks listed this year is very small, only 21 in the first three quarters, and only 1 large-scale new stock listed.
From the perspective of the primary market, according to Qingke's data, a total of 6,510 investment cases occurred in the equity investment market in the first three quarters of 2023, a year-on-year decrease of 259%；The investment amount is 50709.4 billion yuan, down 318%。This situation is similar to 18 years, the industry is more challenged, fundraising has entered a cold winter, and the participation of state-owned enterprises and private capital is very low. At present, the proportion of private equity and venture capital-backed companies listed remains above 80%, which means that about 7 to 8 out of every 10 listed companies are backed by private equity.
Investment strategy sharing
Finally, we would like to share with you our investment strategy.
The development goal of Chinese-style modernization is that by the end of the 14th Five-Year Plan period, the per capita GDP will reach the threshold level of high-income countries, and the per capita GDP will reach 1$460,000. By 2035, the economic growth rate of 4%-5% will be maintained, and the per capita GDP will reach 2$550,000. By 2050, the potential growth target of 3%-4% will be maintained, and the per capita GDP will reach 4Around $870,000. Judging from the situation this year, it is difficult to achieve a target of more than 5%, and I think most of you may still have to lower your expectations to do something, while maintaining sufficient cash flow, and keep pace with national policies.
For venture capital, our core strategy is still to focus on our core main tracks, such as hard technology, big health, and digital economy, and secondly, we should also pay attention to future innovation industries with strong cutting-edge technology and scientific and technological innovation attributes.
As of the end of June, from the perspective of the Topix index, 11 industry indices have surpassed the peak of the bubble, including precision instruments, pharmaceuticals, transportation equipment, rubber products, wholesale**, electrical appliances, etc. The number of "10 baggers" in the three industries of software and services, business and professional services, and semiconductor products and equipment all exceeds 10, which shows that the digital economy is still related to high technology.
To sum up, one of the core investment strategies that outperformed Japan for 30 years is high-dividend stocks, which are very good strategies at presentSecond, the replacement of consumption such as clothing companies, as well as health care, etc.;Third, focus on opportunities related to imitation high-tech and precision manufacturing;Fourth, we should pay attention to the value of companies that seek to expand overseas. Many of the American companies that Warren Buffett has invested in are international companies, and they all have a lot of global industrial layout. China's overseas expansion, including companies such as Pinduoduo, ByteDance, and Luckin, has a good growth curve. Therefore, the proportion of overseas business is a reference index worth paying attention to.
Now I want to mention the investment value of U.S. stocks, there are many successful people this year, but the most successful part of them is investing in U.S. stocks, some people say "all in AI", some people say you can invest in ETFs or NASDAQ index. On the whole, the U.S. stock market is the world's leading leader, and it will affect the entire Hong Kong stock market or A-shares, and even the strategy of the entire Chinese economy.
Finally, to summarize my views, first of all, there is no need to be overly pessimistic about China's economy, China is still a part of the world;China is still growing at a huge rate and at a certain rateWe have a population of 1.4 billion, 4With 300 million middle class, tens of millions of scientists and engineers, tens of millions of entrepreneurs, and a lot of lovely stockholders, this is indeed a very important force. In addition, China's policy level still maintains a posture of reform and opening up, enterprising and innovative.
Secondly, I would like to share a few suggestions for the upcoming Chinese Year of the Dragon. In the Year of the Dragon, we say that we must "get water from the dragon", that is, we must maintain cash flow, protect capital, and have capital to make ourselves invincible. Second, to build their own competitiveness, have their own "unique skills", especially for enterprises, to forge their own core capabilities, this is "the dragon in the field";Third, "playing with dragons and pearls" - it has penetrating power, can peel off the cocoon, handle complex things simply, and make relatively correct judgments and more timely decisions according to different situations. Fourth, "Flying Dragon in the Sky", this is also my blessing, I hope everyone can create their own new world.