Copyright Statement
Source: China Europe International Business School (CEIBS6688), Readshare (readsharecn)
Guests: Wei Zhe, Founding Partner and Chairman of Jia Yu Capital
Su Xijia, Professor of Finance and Accounting at China Europe International Business School
Introduction
Recently, during the CEIBS Alumni Homecoming Day and the 2025 “Vision Comes from Seeing” Annual Forum, Wei Zhe, Founding Partner and Chairman of Jia Yu Capital, discussed the standards of good companies, strategies for Chinese brands going global, and mutual encouragement among investment peers in a dialogue with Su Xijia, Professor of Finance and Accounting at CEIBS.
1
One Hard Indicator and Three Soft Powers
Su Xijia:Mr. Wei is an old friend of CEIBS and has seen many companies and entrepreneurs. First, could you reflect on the characteristics of good companies you have encountered in your career? What kind of companies do you tend to avoid?
Wei Zhe:A good company has one hard indicator and three soft powers. The hard indicator in my mind is not growth rate or company size, but “efficiency.” Growth without efficiency is truly a form of accelerated self-destruction. Over the past decade, we have seen too many companies neglect efficiency while experiencing rapid growth.
Without efficiency, having scale and speed is useless. For example, human efficiency, space efficiency, and gross profit margin. Before looking at profit margins, I pay more attention to gross profit margins. I have a saying: “If high-tech does not have high gross margins, it is all just a show.” If you want to invest in semiconductors, if the gross margin of chips can’t compete with potato chips, then don’t pursue it. Both chips and potato chips are called “Chips” in English.
The three soft powers are very important—team, strategy, and values. The hard indicator allows us to see the company, while the soft powers often serve as the reasons for voting against it.
The starting point of the team can vary, but we focus on progress rather than the starting point. No matter how high the starting point is, it can be eliminated; a company is often more than just its founder; we need to look at the team.
Next is strategy, which has a bit of science and mysticism; we need to look at what remains unchanged in the company’s strategy and what changes.
Values are mentioned last not because they are unimportant, but precisely because they are the most important. Whether developing in China or going global, values are the moral bottom line of a company. These three soft indicators often constitute our reasons for rejecting a company. A hard indicator is like an entrance exam, but often the rejection happens on the soft indicators.
Su Xijia:We have an alumnus in Suzhou who once expressed to me, “Compared to multinational companies, we private enterprises will definitely win—because for us, the company is everything; there are no off-hours, no holidays, we work tirelessly. But for people in multinational companies, this is just a job and a career. However, five or ten years later, they may still be the same, but will our company still exist?” This is a very interesting comparison. In your view, what is the main issue behind the uncertainty of the long-term prospects of Chinese enterprises?
Wei Zhe:This goes back to the first of the three soft powers—the team. I come from a background of professional management, and I am very clear about the pros and cons of professional managers. Professional managers are similar to professional athletes; they are skilled and dedicated but may not necessarily work tirelessly. Chinese bosses may work hard for one generation, but how many generations can you sustain that effort?
In foreign cultures, the issue of team continuity is resolved. The biggest problem for many Chinese companies is the continuity of the team, even the continuity of the founder.
2
All Industries Can Go Global, Except One Type
Su Xijia:In the past two years, a popular saying was “If you don’t go global, you will be eliminated.” The call to go global was overwhelming, but we at CEIBS sincerely told everyone, “If you can avoid going global, do so.” In your view, what kind of Chinese companies should go global? Which companies are not yet ready to go global?
Wei Zhe:My current view is that “all industries can go global.” A few years ago, I said there were several industries that should not go global, such as cosmetics, skincare products, and food and beverages, but over the past three to five years, I have been proven wrong repeatedly. For example, cosmetics going global, focusing on whitening; I said, why would white people want to whiten? But it has indeed succeeded. So I say all industries can go global, but there is one type of company that cannot go global, which is not related to the industry, but to companies that do not yet have a base in China, because that is not going global, but “fleeing.”
I have looked at all the successful global multinational companies in the world and cannot find a single example of one that succeeded globally after losing its domestic market. I see many entrepreneurs who say, “I can’t do it domestically, so I will go global,” and I say that is just “global banditry.” You must first have your own base in China, which requires investment, resources, and a certain number of cadres and talents, and even the ability to produce certain products and conduct R&D. Companies without a base cannot go global, so focus on building your base, and all industries can go global.
Su Xijia:Mr. Wei has given us great confidence, but the strategy for going global is another issue. You have always advocated attacking Europe and the United States first, and then moving downwards. In fact, our alumni usually go to Southeast Asia or Mexico; why is there such a contrasting strategy for going global?
Wei Zhe:In doing anything, choice is more important than effort. There are four very important choices for going global:First, regional choice.We believe that the first attack should be on Europe and the United States; this is not just our belief, but based on observing that when Japanese and Korean brands went global, they also first targeted Europe and the United States before moving to China and Southeast Asia. Why?
First, Chinese brands are generally in a “squatting” position globally; if they go to Southeast Asia, they will be in a “crawling” position, making it even harder to rise again. Therefore, they should first go to Europe and the United States to establish their brand momentum. Moreover, Europe and the United States have strong purchasing power, and they are the regions with the highest internet penetration; the strict market standards will force our companies to improve in terms of product quality and R&D.
We invested in Pop Mart, which truly became popular globally by opening stores in London and New York. There is an old Chinese saying, “Waiting for a rabbit by the tree stump,” which used to be derogatory but is now neutral—”We plant trees at the rabbit hole, and rabbits will surely come.” Pop Mart has planted its tree at the doorstep of Western celebrities.
Second, category choice.We categorize products into 1.0, 2.0, 3.0, and 4.0. Everyone should avoid 1.0, which is a universally applicable type, such as Anker’s power banks; aside from voltage differences, they are identical. The furniture we invested in, Zhiou, is said to be sold in Europe, but it can also be used in China. This means the Chinese supply chain does not need to change, and it can be directly transferred from domestic to foreign markets.
2.0 refers to overseas exclusive types, where the category is not large in the Chinese market but is significant overseas. For example, plus-size women’s clothing; Chinese women may think they need to wear plus-size at 120 or 150 pounds, but in the U.S., it starts at 200 pounds (about 180 pounds), and there is no such special demand in China. Swimwear is similar; Chinese women can name many lingerie brands but few swimwear brands; the swimwear market is not large in China but is significant overseas.
3.0 should dare to venture into non-consumer goods; we see medical devices, industrial products, and large items going global, especially among these products.
4.0 is what we are more optimistic about, which is “AI-enabled smart hardware.” Strive to turn non-powered products into powered ones, and for powered products, consider whether they can incorporate chips; if they have chips, they can incorporate algorithms. We have looked at these four types of companies; those that do not have power usually have a net profit margin of about 5% to 6%, but those that are powered can achieve 8% to 10% net profit margins, and if they make chips, they can reach 12% to 15% net profit margins; those with algorithms and software can achieve over 20% net profit margins.
Third, channel choice.Chinese consumer goods going global will naturally choose Amazon; while Amazon is important, it is not the only option; companies should learn to build their own channel pyramid.
Fourth, brand positioning choice.We oppose going global based on cost-performance ratio; we must focus on “price-performance ratio” and dare to set prices. Reversing the two words reflects a completely different mindset of the founder. Cost-performance ratio is about competing on price between latecomer and earlycomer products. Price-performance ratio is about daring to set prices; if competitors undercut me, I will improve product performance but will not easily lower prices. When Chinese companies go global, brand positioning must follow the path of price-performance ratio.
Su Xijia:Thank you, Mr. Wei, for your insights. Last time we invited an alumnus from Miniso to share, he mentioned that going directly to Europe and the U.S. has a significant advantage, as it allows for the redefinition of the brand’s commercial category. Domestically, Miniso is perceived as a cheap daily goods store, but when the brand opens in New York’s Fifth Avenue or Paris’s Champs-Élysées, it is positioned as a high-end product, which is something that could not be imagined domestically, but abroad, it provides an opportunity for the brand to re-educate consumers.
At the same time, I want to remind everyone that even if a Chinese brand is well-known domestically, it may still be a “white label” in Europe and the U.S. Xu Yang, an alumnus from Anta, shared a painful experience with me; he once went to New York to meet with a large shoe retail chain, Foot Locker. After a long wait, when he finally got in and started introducing Anta’s position in the Chinese market, the response was, “No matter what brand it is, it is a white label here.” He was dismissed in five minutes.
Later, he learned from this experience and devised a different strategy. The day before, his team told him they were confident they could sell 60% to 70% of the inventory of a particular shoe in one day. Xu Yang said that was not the result he wanted; he wanted customers to line up overnight to buy the shoes, so he directly destroyed half of the shoes. The subsequent story was that there was unprecedented overnight queuing to buy these shoes in five locations around the world, and after the success of the shoe sales, Foot Locker proactively called him to discuss cooperation. Xu Yang reflected that the same Anta, the same shoes, how to use the right strategy, and how to utilize your products and channels—there is so much to learn when going global.
Continuing from the previous topic, most companies going global will still choose Southeast Asia or Mexico first; what do you think motivates them to start in Southeast Asia?
Wei Zhe:When I talk about prioritizing Europe and the U.S. for going global, I am referring to Chinese brands; this does not mean that Chinese manufacturing should go global. Mexico and Southeast Asia may still be the first choice for manufacturing going global. What is more important today is—where is the sales destination, that is, where is the brand’s destination?
The earlier mention of targeting Europe and the U.S. refers to the core consideration of brand globalization, while if manufacturing cannot be fully automated or has low automation levels, going to Southeast Asia and Mexico is also acceptable. If the automation level is high, I suggest trying Europe and the U.S.
3
Good Companies in the Eyes of Investors
Su Xijia:Next, I would like to ask Mr. Wei to share with us what kind of companies you would choose to invest in? What industries do you think have the most potential to stand out in today’s Chinese business world? Which types of companies?
Wei Zhe:Actually, it boils down to four words: I am particularly optimistic about companies that are “soft and hard combined.” Everyone thinks that Nvidia’s five trillion dollar market value is solely based on selling chips and hardware, but if Nvidia were to leave its CUDA software ecosystem, it would be impossible.
I met with people from Tesla’s China region the other day, and they do not say they are just a hardware company that makes cars; they say they are an IT company, an intelligent company. Therefore, in the tech industry, there is a strong emphasis on combining software and hardware. The success rate of purely software companies going global is low; it is even harder to charge for software in China.
For consumer companies, I also prefer those that combine soft and hard elements; consumer companies should carry IP, emotional value, and culture. Pop Mart has high gross margins because it is not just a hardware company selling trendy toys. Whether in the Chinese market or the global market, companies that combine soft and hard elements are more likely to succeed; I would not dare to touch “pure hard” or “pure soft” companies.
“Soft and hard combined” also includes the soft culture of the company. I studied foreign languages and diplomacy and have worked in multinational companies; I once helped Fortune 500 foreign companies establish themselves in China. Many CEIBS alumni have helped multinational companies establish themselves in China, and these experiences provide us with great insights—like the other side of a mirror—on how to help Chinese companies establish themselves globally.
I want to say that the term “going global” itself is not advanced enough; I now advise companies to be “born to be global.” Of course, we are not born to be global, but when we understand what the ideal state of being born global is, we can take steps from the perspective of going global to gradually move towards being “born to be global.”
What does it mean for a brand to go global? It is not just about the position of our brand in the minds of consumers and clients; I want to emphasize that Chinese companies going global must also pay attention to their “employer brand.”
I often say, take a look at some of the English websites of companies going global; many foreigners would definitely not come because they introduce “wolf culture” and “996” in English. Some may not take it seriously, thinking that if we go to Europe, paying double or triple the salary is enough. I say if you think this way, it will be difficult to manage your employer brand, so building an employer brand may be even more important than building a consumer brand, and having the mindset of an employer brand brings you one step closer to being born global.
Su Xijia:In your view, in which industries do Chinese companies still have many opportunities? Which industries are nearing their peak?
Wei Zhe:The best industry is the one mentioned earlier: AI + hardware, which is a newly created category. Taking sports brands as an example, the sports category is very complete abroad, making it difficult to carve out a niche. However, the category of “AI + hardware” does not have major brands abroad, making it easier to create new categories. Expanding new categories in overseas exclusive markets is the easiest way to form “category equals brand” in the overseas market; we prefer to choose excellent companies in this area and help them achieve this.
Su Xijia:Finally, please share a few words for your investment peers at CEIBS.
Wei Zhe:When investing, it is essential to focus on China. Although there are overseas layouts, Chinese companies “going global” face significant challenges. Our overseas investments will be more challenging, but we continue to be optimistic about China, and we believe that each generation will present new opportunities.
Do not be afraid of missing a train; just wait there. Do not jump off the train; buying a new ticket is expensive, and it is easy to fall off the train. You must believe that another train will come; before that, find a good position at the station and wait for the next train to arrive; it will definitely come.
