Jiuyou capital
Pay attention to the investment of scientific and technological innovation enterprises
This article is a speech by Li Yang, the founding partner of Jiuyou Capital, at the annual LP conference of Jiuyou Capital on May 27th, 2022.
Facing the current uncertain environment, Jiuyou Capital, as a professional investment management institution, how to treat risks, how to deal with challenges and how to seize future opportunities?
About 20 thousand words, full of sincerity, to share with you. Please read the following full text.
Investors: Hello everyone!
Thank you very much for your trust and support to Jiuyou Capital! At the same time, we warmly welcome you to attend the annual fund report meeting of Jiuyou Capital in the next few days.
Recently, many friends are more or less anxious. Some of our partners and investors have asked me how to view the challenges and risks that China will face at this stage and in the future. I have also done some thinking around these problems. Today, I would like to take this opportunity to share with you: Jiuyou Capital, as a professional investment management institution, how do we view the current uncertain environment, how to deal with future challenges and risks, and how to grasp future deterministic opportunities.
First of all, I want to share with you a picture that helps us to see the development of China from the "super cycle":
This picture comes from Principles-Coping with the Changing World Order, written by Ray Dalio, a world-renowned investor and entrepreneur, and the founder of Bridgewater.
Redario integrates eight indicators: education, competitiveness, innovation and technology, economic output, global trade share, military strength, financial center strength and reserve currency status to measure the proportion of "relative comprehensive national strength" of different countries on a global scale; At the same time, he put the "relative comprehensive national strength" into the "super cycle" spanning hundreds of years to study the changing law of the world order.
In this picture, the red thick line represents China, the top blue thick line represents the United States, the black thick line represents Britain, the orange thick line represents the Netherlands, and other major countries such as Germany, France, Russia, Japan and India. We can see the changing track of the "relative comprehensive national strength" curve of different countries in the more than 500 years since 1500; With these changes, mankind has indeed experienced several changes in the world order.
Specifically: 1500 years, I checked some information, and China was in the middle of the Ming Dynasty, which was a relatively open era. We can see that China's "relative comprehensive national strength" was the first in the world at that time. However, with the closed door at the end of the Ming Dynasty and after entering the Qing Dynasty, China's "relative comprehensive national strength" began to decline, until the middle of 1900-2000, and it fell to a very, very low bottom. I believe people all over China know very well that our country was experiencing War of Resistance against Japanese Aggression at that time, which was the crisis of the Chinese nation. There's nothing worse than this time.
In the past 500 years, the country that rose after China was the Netherlands. Why Holland? I also read history, which is very interesting. The Netherlands is the earliest maritime trading country and one of the countries that started the era of great navigation in the world. Through a series of maritime hegemony and maritime trade activities, the Netherlands has achieved the improvement of its comprehensive national strength. After the Netherlands, it is the famous "empire that never falls" in history-the British Empire. After the Netherlands, Britain is the second country to gain huge benefits from maritime trade, which is of course accompanied by a series of wars and colonial expansion. Then came the rise of the United States, which reached its peak around 1900, especially after World War II, and became the most influential country on the whole earth at that time.
Of course, we also saw that at this time, China began to turn. With the establishment of 1949 New China, it began to bottom out. Especially after 1978' s reform and opening up, China's "relative comprehensive national strength" has entered a stage of rapid soaring. In just over 40 years, it has gradually surpassed all other countries and become the second in the world after the United States, and it is still in the stage of rapid rise; Of course, there is still a gap compared with the United States. At the same time of the rise of China, we can also see that the United States has begun to "peak" downward. According to the changing trend of the curve of "relative comprehensive national strength" between China and the United States shown in this picture, after a period of time, as the curve continues to extend to the right, we have reason to believe that there will be an intersection between China and the United States, and China's "relative comprehensive national strength" will surpass that of the United States at some point.
Why should I share such a picture with you at the beginning of today? First of all, I want to say that this research was not done by China, but by an American through and through. The author is over 70 years old and is an investor and entrepreneur with considerable influence all over the world.
I share this picture and this research with you, in fact, in the hope that all of us can see the development of our country from a longer historical cycle and in a larger world pattern. Such a vision and pattern will certainly help us understand the current stage of our country. Maybe it doesn't mean that China must be the boss, maybe it's just the inevitability of historical development and phased development.
After looking at the 500-year "super cycle", let's look at a relatively small cycle. what are you reading? Looking at the "supercycle" again, the fastest development time in China is 1978 40-50 years since the reform and opening up. During this period, China created a remarkable "world economic miracle". But we still have to go back and have a look. Even in the 40-odd years known as the "miracle of the world economy", have we had smooth sailing? Haven't we encountered any difficulties, setbacks and challenges? Not really!
I briefly explained that in the 40 years since 1978, we have experienced some special things in many special years. These things had a great influence at that time, which made many people feel very, very difficult at that time.
When we look back on the development of China in the past 40 years, just like climbing a mountain by ourselves, it is not easy to climb any mountain. But when we look back on it, it doesn't seem so difficult or great. This is a common phenomenon.
So let's go back and sum up that even the 40 years of China's "economic miracle" was full of twists and turns! China's economy has always been growing in challenges, and it has never been smooth sailing!
Looking at the present, in 2022, from the outbreak of the Russian-Ukrainian war at the beginning of the year to the rebound of the COVID-19 epidemic in Shanghai, Beijing and other cities in recent months, the prevention and control of the epidemic situation led to difficulties and obstacles in all aspects of the country's economic development. But if we put 2022, as we just shared, into the development cycle of China in the past 500 years, into the cycle from the 40 years of reform and opening up to the present, into a longer historical cycle and a larger historical pattern, 2022 is undoubtedly another setback and bumpy in our development, and it is the bottom of the cyclical cycle.
In this context, we need to analyze it very calmly. What is the biggest uncertainty facing the country at present? I have done some thinking myself, and finally I think the core is three aspects:
The first is the game between big countries. Of course, the rise of China and the former world leader, the United States, will not be reconciled. Of course, going back to what I said before, it is not necessarily that China must replace the United States as the number one, but it may just be a historical cycle of world development, with ups and downs. In other words, the change of the world order is something we must face. Every hypercycle of 150-200 years will have such a change. In this case, can the global pattern be stable? I believe that the past few historical cycles have given all mankind many experiences and lessons. I believe that neither China nor the United States nor other countries want the whole world to fall into a very bad situation again. Therefore, under the background of great power game, we always believe that China will continue to rise. Although the process of going up will not be smooth sailing and will encounter various twists and turns, this general direction and trend will not change.
The second uncertainty we are facing now is the current COVID-19 epidemic. The spread of Omicron is very strong, and the tug-of-war of epidemic situation and prevention and control will have an impact on the economy, which we will share later.
The third is the potential war risk, which is accompanied by the great power game and the continuation of the Russian-Ukrainian war.
To sum up, the three biggest uncertain factors facing China at present are big country game, epidemic prevention and control, and war risk. In this context, we will encounter all kinds of difficulties; Further analysis is to see three core challenges that the country must find ways to overcome at present.
First of all, we should look for new engines of economic growth, especially in the environment affected by the epidemic. In recent years, everyone has seen the necessity of maintaining economic stability in real estate from the adjustment of the state and the central government, but it is inevitable that we can no longer place high hopes on real estate. In the next five years, 10 or even 30 years, it is impossible to rely on real estate as a pillar industry for economic growth. Other industries, such as education and culture, may be difficult to become real pillar industries with considerable volume, including traditional infrastructure. It is ok to maintain stability, but we must seek new engines and the right direction to promote China's new explosive economic growth.
The second challenge is to realize the self-control of core technology, which has been talked about for the past few years.
The third challenge is to do everything possible to ensure peace and stability at home and abroad. The external potential war risks and internal fluctuations caused by epidemic prevention and control need to be overcome as soon as possible.
In the current context, we should also see that no matter how the external environment changes and how arduous the internal challenges are, there are three very certain megatrends that will not change.
The first is the aging of China, which is bound to come like a spring tide. It is not difficult to calculate the data. We only look at when people born in the 1950s, 1960s, 1970s and 1980s entered the 60s, 70s and 80s respectively. According to the current data of China's population age structure, in the next 20 years, by 2050, China's elderly population over 60 will reach nearly 500 million, accounting for more than one third of the national population. 500 million, what is this concept! The population of the United States is now 333 million, and the population of Europe is only 740 million. The elderly population in China alone will be close to 500 million. This is a huge and clear trend.
The peak of carbon dioxide emissions, the second clear megatrend and carbon neutrality. Why is "carbon neutrality" a very definite trend? We share it with you from another angle, because "carbon neutrality" is one of the few goals that most countries in the world can achieve at present, alleviating the deterioration of the earth's environment and realizing the sustainable development of mankind. Of course, the value of this megatrend is not only to achieve this goal itself, but more importantly, it will lead to a series of technological revolutions, the improvement of human production efficiency and quality of life, and the development of various green new energy sources and new technologies in the process of achieving this goal. We'll talk later.
The third clear trend is the development of digitalization and intelligence. With the decrease of the labor force population, the advancement of aging, the requirements of improving productivity and production efficiency in all aspects, and the urgent need for new economic growth engines, we will inevitably need digital and intelligent development.
We can say with great certainty that no matter how the external environment changes, no matter what difficulties and challenges we encounter in the process, the development of aging, carbon neutrality, digitalization and intelligence is very, very certain. When will China's GDP reach the top in the world? We don't think this is our focus, because it is bound to happen, just whether it is in 2028 or 2030. What we should pay attention to is to analyze the core challenges faced by China, gain an insight into the very definite trends in the future for a long time, and at the same time pay attention to national policies, pay attention to the directions and goals set by the national "14th Five-Year Plan" and the industrial planning in the next "15th Five-Year Plan" and "16th Five-Year Plan", seize the opportunities, and realize the creation and appreciation of wealth through these opportunities.
What is the final conclusion, that is, independent control of core technologies, solving the bottleneck problem, ensuring new economic growth, solving the aging problem, and realizing carbon neutrality, digitalization and intelligent development? For China in the next 30 years, the most fundamental and greatest opportunity before us is scientific and technological innovation! The core of scientific and technological innovation is the development of medical treatment, health, new energy, informationization and intelligent technology.
If I only talk to you about "technological innovation", you may feel that it is still not intuitive enough and too abstract. How does technological innovation change our lives? How to solve the problems we are facing now? Let's be more specific and intuitive. For example, scientific and technological innovation promotes digital and intelligent development. Digitalization and intelligence do not exist alone, but will be closely combined with many traditional industries to promote the transformation and development of traditional industries, such as agriculture, animal husbandry, many consumer industries and industrial manufacturing, so as to promote the iterative upgrading of industries, improve productivity and productivity, and thus solve the problem of weak economic growth in China. So is aging. The medical care, health and pension problems of so many elderly people must also be solved through life science and medical science and technology innovation. Not only will we live longer and longer, but we also hope that we can live better in this long time, so health is very important. There is also the problem of environmental protection. The development and utilization of clean new energy also needs the power of scientific and technological innovation to solve the problems of environmental pollution and climate deterioration, and realize the peak of carbon dioxide emission, carbon neutrality and the long-term sustainable development of all mankind. For another example, the quality of production and life of our human beings also needs the research and development of many new materials and the development of high-end intelligent equipment. For another example, what does it depend on to maintain world peace, achieve national unity and stabilize the external environment? Can it be achieved only by ideals and beliefs? Can't be achieved. To have firm ideals and beliefs, national defense science and technology cannot be separated from innovation and strength. Just like our country and nation, why have we been bullied and treated so unfairly in the past 200 years? It is because our national defense technology is too weak! We have made some progress now. We can see that all those advanced tools that can ensure national security, whether aircraft carriers, J-20 fighters, Dongfeng Express or our International Space Station, are not supported by strong technology. Which one is not guaranteed by strong scientific and technological innovation strength?
Through these, everyone will have a more intuitive understanding and feeling. Only by promoting scientific and technological innovation, realizing a strong country in science and technology and taking the lead in the new round of scientific and technological revolution is the foundation for China to overcome various challenges and solve various problems; It is also the biggest opportunity that we must seize in many uncertain environments.
In addition, we also want to say that in China, as mentioned above, whether it is to prevent and control the COVID-19 epidemic or solve the difficulties in economic development, we still have to believe that China is a country different from many countries in the world. It has many characteristics, one of which is that it can "concentrate on doing great things", which is unmatched by many countries in the world. The United States is a typical two-party system. Even if the president is a Democrat, half the governors are Republicans. Just like when Trump was president, the governors of the opposition parties were clearly opposed to the president. Can such a thing happen in China? As we all know, this is absolutely impossible. In China, as long as a clear goal is set, all resources and abilities can be mobilized to deal with it. This kind of thing will only happen in a country like China. Therefore, in China, we can clearly say that it has a very, very great, even beyond imagination, ability to mobilize and control resources. Therefore, the influence of policy orientation on industrial development and the choice of our investment direction can be said to be the most important. As we mentioned earlier, real estate, education and training, internet, anti-monopoly, games and live broadcast are unlikely to become industries encouraged and supported by the state in the next stage, and neither will these. What could that be? In fact, it has been clearly stated in the outline of the tenth five-year plan for industrial development. China has moved from the era of pursuing quantity in the past to the era of pursuing quality in the future. It must be our emerging industries, science and technology industries, biomedicine, brain science, new energy, new materials, high-end equipment, intelligent equipment ... The policy points out these directions, so where will the funds flow? It must be in these directions, too.