Eric Chang Director of Incubation Microsoft Advanced Technology Center Beijing, China.

Eric ChangDirector of IncubationMicrosoft Advanced Technology CenterBeijing, China

UrbanHousehold : 182m

People : 543m

Total ChinaHousehold : 368m

People : 1298m

Source: China National Bureau of Statistics, & Gallup Poll, Dec-2004, inspired by Sen. John Edwards’ “Two Americas”

Urban, Everyone elseHousehold : 160m

People : 494m

RuralHousehold : 186m

People : 755m

Urban, Top 10 citiesHousehold : 22m

People : 49m

• The “Glam” China• Top 10 cities – with Beijing,

Shanghai and Guangzhou as Top 3

• Annual HH income in Top 10 = US$4k, in Top 3 = US$5.5k

• Symbolized by the Pudong skyline

• The China that got left behind

• Annual HH income = US$1k

• Living off the land, not the global economy

• Symbolized by the peasant

• The “Middle” China,• The “real “ emerging market of

China• Annual HH income = US$3k• Symbolized by the moped

Even within urban, top 10% households make 8X that of

bottom 10%

Income differences between urban vs. rural

1.3

1.9

2.5

3.3

4.2

5.5

9.1

0 2 4 6 8 10

Bottom 10%

10-20%

20-40%

40-60%

60-80%

80-90%

Top 10%

Source: Gallup Poll, Dec-2004

USD 000

Dramatic increase in electronics ownership between 1999 and

2004

…but significant gap between large cities, small towns and

rural areas in 2004

Source: Gallup Poll, Dec-2004

% ownership by

household

% ownership by household, 2004

Recently concluded qualitative research in Henan Province, Middle China; tested reaction to:Fone+ as a PC alternativeVarious applications on Fone+Price points, hardware brands

Participants all made between US$100 and US $250 per month, PC literate, owned mobile phones but did not have a PC at home

Different age and life profilesYoung Males 18 – 24Young Females 18– 24Single 24 – 35Parents 35 – 45

Different geographic areas within HenanLarge metropolitan area (ZhengZhou)Mid-sized, emerging town (XuChang)Small town, semi-rural (Hui County)

Also conducted quantitative survey of 1146 people across non-rural China (executed by McKinsey)

A sea of mopeds in front of town’s only non-Chinese restaurant

But clearly, there is a new bourgeois in town

Pop:~½ mil

HH Income:~ US$200 per month

1/3 billion Chinese live in towns like Hui County

Top scenarios fully leverage the TV

% that selected the responses below

23%

22%

16%

7%8%6%

3%

15%

Q: “If you could select just one thing, what would you say appeals to you the most about this idea?

Source: Quantitative Survey of 1146 people aged 13 to 54 across non-rural China

Eric Chang

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The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after

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