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

3. Urban Household : 182m People : 543m Total China Household : 368m People : 1298m Source: China National Bureau of Statistics, & Gallup Poll, Dec-2004, inspired by Sen. John Edwards’ “Two Americas” Urban, Everyone else Household : 160m People : 494m Rural Household : 186m People : 755m Urban, Top 10 cities Household : 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

4. Even within urban, top 10% households make 8X that of bottom 10% Income differences between urban vs. rural Source:Gallup Poll, Dec-2004 USD 000

5. 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

6. Recently concluded qualitative research in Henan Province, Middle China; tested reaction to: Fone+ as a PC alternative Various 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 profiles Young Males 18 – 24 Young Females 18– 24 Single 24 – 35 Parents 35 – 45 Different geographic areas within Henan Large 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)

7. A sea of mopeds in front of town’s only non-Chinese restaurant But clearly, there is a new bourgeois in town

8. Pop: ~½ mil HH Income: ~ US$200 per month 1/3 billion Chinese live in towns like Hui County

9. Education User Profile: Students below 18 Grade 8 students in China Seed Education community Emerging Market Internet Access User Profile: Rural Households Entertainment User Profile: (20-25 years old) Music, video & casual games

10. 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

11. Eric Chang

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13. Microsoft Research Faculty Summit 2007