On November 20th, during the International Financial Leaders Investment Summit 2024 and the dialogue session with international investors, Zhang Lei, Chairman of Hillhouse Capital Group, stated that the Asian private equity market has not been fully developed yet and holds great potential for growth. He believes that the Asian market provides more promising investment opportunities compared to Europe and America for investors seeking higher returns. Zhang Lei expressed his belief that there will be more phased stimulus measures in the future. In contrast to macroeconomic fluctuations, Hillhouse Capital Group focuses more on the development of companies themselves. Looking at the history of development in countries like the United States and Japan, great companies often emerge during times of macroeconomic challenges. In early November of last year, Zhang Lei also expressed similar views, stating, "Most successful companies are actually born during the most challenging and difficult times, not during sunny days. When we look at Asia today, we are facing economic slowdown challenges, but we are also seeing the birth of great companies." Today, he reiterated his belief that looking back 20 years from now, this period will see the birth of the greatest companies and entrepreneurs. "For a vast economy like China, we have talented, energetic, and resilient entrepreneurs. I can't think of a better stress test environment than this." Furthermore, he believes that with the trend of Chinese companies expanding overseas, Hong Kong is the perfect location to establish regional headquarters, as it can also build a talent pool and an internationalization hub. Asian Market Provides Greater Investment Opportunities Compared to Europe and America Q: In recent years, the fundraising pace of private equity in Asia has significantly slowed down, far below the peak in 2021. Can you share with us how global institutional investors view Asia? Are they still interested in Asia? Zhang Lei: Thank you to the Hong Kong Monetary Authority for organizing this very exciting event. I strongly agree that Asia is a market where private equity has not been thoroughly explored, and there is significant room for development. I also want to emphasize that, first, if you invest in genuine private equity, it is actually a market very close to the real economy, and it is not a market where leverage wins. In private equity investments in Asia, leverage is much lower than in Europe and America. Therefore, you rarely see Asian private equity relying solely on leverage, cost-cutting, or financial engineering opportunities. This is not a market dominated by financial engineering but one centered around the real economy. Secondly, I believe that the entrepreneurial spirit in this market is getting stronger. The entrepreneurial drive of entrepreneurs can bring more market innovations, and private equity has the opportunity to provide mature management to entrepreneurs. By supporting entrepreneurs, one can obtain returns unrelated to market fluctuations, and I believe that the risk of these returns will be lower. They do not carry the risks associated with high leverage or the high multiple expansions commonly seen in other markets. This period may see the birth of the greatest companies and entrepreneurs Q: Can you share your outlook on the future of China? Which industries are you paying more attention to? Zhang Lei: I am not a macroeconomist, so I will not talk extensively about macroeconomics or economic growth-related matters. Recently, we have indeed seen some positive news, and even yesterday, we heard that more stimulus measures are about to be launched. I believe there will be more phased stimulus measures in the future. I want to remind everyone that we are ultimately bottom-up investors. If you pay attention, you will find that almost all of the most successful companies were born in the most challenging times. When was Amazon Web Services established? Was it in 2003 or 2004, when the Internet bubble had just burst? The "birth moment" of the iPhone was in 2008 or 2009, after the global financial crisis. During Japan's so-called "lost decade," many great companies were born during that period. I want to remind everyone that for a vast economy like China, we have talented, energetic, and resilient entrepreneurs. I really can't think of a better stress test environment than this. I believe that looking back 20 years from now, this period will see the birth of the greatest companies and entrepreneurs. With the trend of going global, Hong Kong is the perfect location for regional headquarters Q: Many Chinese companies are "going out," from the perspective of private equity, can you share your observations on this trend? What role can Hong Kong play in this process? Zhang Lei: I think this is a huge opportunity. From the perspective of China, the essence of many entrepreneurs' businesses is fundamentally global, because they are the best in the global supply chain. I see more and more entrepreneurs actively entering Southeast Asia, ASEAN countries, including battery supply chains, energy storage, consumer goods companies, and more. In fact, companies in the technology and internet industry have already begun this movement. For example, when we initially invested in e-commerce companies and logistics companies, we imported talents from Meituan and JD, and about 7 to 10 years ago, these talents supported our investment in Shopee. Similar phenomena have occurred in Grab and the new energy vehicle battery supply chain, with more and more companies replicating this model. I believe the key to success is that the best entrepreneurs will expand their businesses globally and devote themselves wholeheartedly to their careers. I think Hong Kong is in a very advantageous position in this process because these companies need a regional headquarters or global headquarters to build, not only to establish international capital markets and attract capital, but more importantly, to build a talent pool and an internationalization hub in Hong Kong. For example, we are in discussions with a mainland Chinese IVD (In-Vitro Diagnostics) company that simply cannot hire outstanding talents fluent in English and able to enter the ASEAN market. Hong Kong is the perfect location for them to establish a regional headquarters and expand overseas, attracting talents. Hong Kong has more and more universities and technology parks. I believe there are many opportunities here, and we are still in the early stages. This article is reprinted from the "Investment Workbook Pro" WeChat public account, GMTEight editor: Chen Xiaoyi.