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

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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

12 © 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. 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 the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

13 Microsoft Research Faculty Summit 2007

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