As a service to our readers and those with an interest in the research reports, academic and statistical data, and media references used in the writing of Supertrends of Future China, the complete Endnotes section is now available online.

Each note is supplemented with a hyperlink (when available) to visit for more information.

The endnotes can be found by clicking here or at the top menu bar, “Book Notes and Excerpts.”

Categories: Announcements
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Just in time for the Olympics, Supertrends of Future China is on shelves now for retail sales in the following bookstores (and will be available in wide-release in the US mid-August):

Singapore

Borders Pte Ltd
Kinokuniya Book Store
Page One Bookshop
MPH Book Store
Popular Book Store
The Commercial Press
Times Newslink
Harris Book Company
Times The Bookshop

Hong Kong

NewsLink (Airport bookshop)

Malaysia

Borders Pte Ltd, Times Square
Times The Bookshop
Kinokuniya Book Store
Nation First Books
MPH Book Store

As before, the book can still be pre-ordered online for immediate delivery in your area when it becomes available, see our list of online retailers for more information or contact us.

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In Supertrends of Future China, we discuss the need for localization of products and services when foreign companies come to China. We take it one step further, saying that products from the Chinese market are going to have a big influence on the lives of people outside of China as well. Think instant noodles or traditional Chinese medicine (TCM) as two early examples. China’s large market will encourage firms to create products suitable for local use, and some of the best will boomerang back. We call this Sinofication.

Back in October last year, Coca-Cola made news in China by establishing a research center specifically for products related to TCM ingredients. This announcement was important for two reasons. First, Coca-Cola showed how important China’s market was by increasing R&D spending there and, second, that the functional foods and beverages category (especially in Asia) is a growing trend.

While the kinds of beverages being developed are still kept secret, they could be standalone products (Coca-Cola makes teas, juices, and bottled water in addition to sodas) or a new variant on the original Coke recipe: Traditional (Chinese Medicine) Coca-Cola, anyone?

In fact the company is in a good position to benefit from a potential Coke-TCM concoction: Coca-Cola, originally containing cocaine from Coca leaves, was created as a tonic (”Coca-Cola Revives and Sustains” - 1905 slogan), and, in China, Coca-Cola is commonly given as a home remedy for some maladies by boiling it together with ginger and lemon, served hot to the patient (this is also a popular drink in many Hong Kong-style restaurants). Coke Adds Life? It may yet, if the TCM research bears fruit.

A recent article illuminated a few new details of Coca-Cola’s plan:

Cao Hongxin, the president of the China Academy of Chinese Medical Sciences, said that the center “has a few projects” with Coca-Cola.

“Generally speaking, we want to create drinks that relieve fatigue and help the body fight off diseases,” he said. “(Coke executives) all hope to develop a Chinese-medicine-based beverage quickly.”

The director of the research center, Zhang Huaying, said of potential TCM-based beverages that “The aim is to be global but the source of the knowledge comes from China.”

We think this is a growing trend. Products influenced by their China localization or innovated from scratch in China will make greater inroads into global markets. Bubble tea, green tea extracts in just about everything from shampoo to anti-cancer preventative supplements, and China-influenced designer bags are just the start. Solar water heaters, solar-powered everything actually, invented elsewhere but perfected in China, are among the country’s next big exports. That, and TCM Coke.

Categories: Book Update, China Supertrends, Servicing
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Huge numbers capture the imagination, while some numbers merely surprise, and still other numbers only reaffirm or validate an expectation. China’s Internet users now top 253 million, the highest globally. This announcement by the China Internet Network Information Center (CNNIC) falls into that final category: After all it was only a matter of time before China’s Internet users surpassed those of the formerly-number-one (and birthplace of the net itself) United States, because China’s overall Internet usage rate even now stands at less than 20 percent, versus more than 70 percent in the US.

Since the time of the Great Wall and its first population estimates, China has been a nation of superlatives. Currently it has the longest bridge, the fastest train, the biggest shopping mall, and so on. We even covered this in Supertrends of Future China as the propensity to over-build infrastructure for

1. expected growth (Bejing’s new T3, the world’s biggest air terminal and building);
2. prestige or attention-getting (how about the once-planned 13-mile concrete dragon project);
3. and lack of financial restraints and stakeholder safeguards (easy lending terms, land grabs).

(In fact, a whole book was recently written about just the urbanization and infrastructure trends alone, the aptly-named Concrete Dragon)

Back to China’s Netizen population, I’m with ImageThief in believing the absolute numbers themselves are not as important the stories behind the data, the context. For example, what exactly are China’s estimated 253 million Internet users doing on the web?

A whole lot of blogging going on

China has more than 107 million blogs and spaces as of the end of June 2008, according to the latest CNNIC survey. This is up from 73 million last November, growing 46.5 percent. Active bloggers have increased to 70 million, up from 47 million last November, growing almost 50 percent in seven months. Who are the most popular bloggers?

Although QQ.com and 163.com are the recognized leaders in blog hosting in China, Sina.com hosts three of the top bloggers: Director/actress/writer/traveler Xu jinglei, singer/actor/writer/race car driver Han Han, writer/model/TV personality Acosta.

Each blogger has more than 170 million accumulated visits, with Xu Jinglei topping 180 million to be China’s (and by some measures, the world’s) most popular online personality.

Other rankings, such as BlogRank.cn, put Bill Gates’ personal blog as the 6th most popular, while a movie review blog written by a Chinese girl named duoduo is ranked number one, followed by another multi-talented actress/model/writer Yang Gongru.

It seems that China’s blogosphere rankings are ruled by the individual, unlike most US rankings, which tend to be dominated by gadget and gossip sites (e.g. Endagadget, Perez Hilton, Gawker) and collaborative works (e.g. The Huffington Post, BoingBoing), or the occasional celebrity blogger (e.g. Rosie O’Donnel).

China’s most popular blogs, on the other hand, retain a kind of casual atmosphere where down-to-earth celebrities write about what’s on their minds without slick product or site tie-ins. In China, monetization of blogger content (a la Google AdWords, or paid sponsorships) is only in its nascent stage and most popular bloggers elect to be site-hosted rather than self-hosted with their own URL. To be sure, some may be paid to post on those sites to draw in advertisers, but very few of the 70 million active bloggers would fall into that category.

Gawker recently lamented that too many people in the US blogged for free; in China, pretty much everyone blogs for free, and parlaying online popularity into real-life money or fame is a still seldom occurrence.

It’s clear to me that China’s blogosphere has much growth potential and opportunities yet to come.

(Come back for part two of this story on Monday.)

Categories: China Supertrends, Inter-Networking
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Last week in a major environmentally-themed speech in Washington, Al Gore called for complete elimination of carbon-based energy generation in the US within ten years. It was a bold statement, equivalent to Kennedy’s Man on the Moon address, and then some: Achieving his goal will not only require the full participation of the US government, but also that of every consumer in the United States, a far more ambitious effort than the manned moon landing. It’s an inspiring speech that I highly recommend:

Predictably some feel this is a long-shot, if not an impossibility. Yet perhaps that is the point: By aiming for the stars, at least we may reach the moon.

And I’ll go one step further to say that, if the US is to have any chance of success, China’s participation will be needed as well, to provide many of the products needed - the solar water heaters, the wind turbines, the batteries to store power in electric cars, among other things.

A growing number of Chinese firms listed domestically and abroad are positioned to profit from China’s own environmental woes by taking them as the newest business opportunities. We make this point in Supertrends of Future China (scheduled for release in about three weeks, just before the Olympics), where we devoted a full chapter to what we call the Greening Supertrend.

In brief, Greening is the intersection of China’s national environmental policy with the domestic and global trends towards clean energy and pollution reduction. A new generation of entrepreneurs in China is embracing this modern Green Revolution. By taking advantage of the domestic market size and manufacturing power, they will put China at the forefront of environmental technologies, first domestically and then, if present trends continue and Gore’s vision becomes a reality, globally.

Red Star Greening Over China

The central government has put green development as a prime objective of the 11^th Five Year Plan for China’s economy. The target is further outlined in the Five Year Plan for Environmental Protection. Many critics rightly point out that national policy is often ignored at the local levels, but last year’s promotion of the State Environmental Protection Agency (SEPA) to full ministry status is a sign of how seriously the central government is taking the issue.

Recently, the government has made some regulatory steps which are actually putting China in the lead of global environmental policy: For example, the plastic bag ban I discussed last week was announced, implemented, and accepted by the national population in just six months.

Replacing those bags with environmentally-sound reusable bags is just one of the new opportunities that China’s entrepreneurs have already jumped into. On a much larger scale, China’s wind and solar energy industries are taking center-stage.

The World Wind Energy Association currently ranks China as number five in a list of global wind users. China has approximately six thousand megawatts of generating capacity, about a quarter of world-leader Germany’s capacity, and not even one percent of China’s massive energy needs. Shi Pengfei, the vice-president of the Chinese Wind Energy Association, said that the National Development and Reform Commission had increased China’s target of wind-energy generation to 100,000 megawatts by 2020, five times as much as Germany’s present capacity.

Xinjiang Goldwind Science and Technology Company (SZ 02202), China’s leading wind turbine producer, went public on the Shenzhen stock exchange in 2007. Although large scale wind farms face many obstacles in China, such as an electric grid that is oriented towards cheaper coal-powered energy generation, on the strength of its domestic market growth, some analysts (additional link) believe Goldwind and other Chinese companies can rise in the next three years to challenge the world’s biggest turbine manufacturers including GE.

By 2020 the central government has pledged meeting 15 percent of China’s energy needs through renewable energy sources, including wind, biofuels, water, and solar. By 2050, the ratio is to be 30 percent including nuclear power. This means huge investments are required, but China is already a world leader in the use of at least one clean energy technology: Solar.

Star light, star bright

In many of China’s second, third or fourth tier cities, rooftops are covered by solar water heaters. The cheap, ubiquitous devices use the sun’s rays to heat water so that even rural workers can afford to take a hot shower after a long day’s work. In China, 200 million people have their water heated in this way, according to the NDRC. China has more than 50 percent of both the world’s production and use of solar water heaters, and other forms of solar energy are starting to grow as well.

Suntech Power (NYSE:STP) is the world’s third largest solar cell producer after Q-Cells of Germany and Sharp of Japan. It had US$1.4 billion in revenues in 2007. Revenues are expected to increase quickly as solar cell-generated electricity starts to approach price parity with carbon-based energy sources such as coal and currently high-priced oil.

The government is also active in solar energy policy, mandating that China should increase its current 100 million square meters of solar water heaters to 150 million by 2010, and 300 million by 2020.

With China set to take its place as the world’s largest economy by mid-century, its power needs will also dominate and, if it is not careful, the pollution problem will reach unprecedented levels. Green technologies promise to be among the best industries to be in during this challenging period of growth.  While China’s domestic market alone is a considerable prize for any green company, globally the potential is astronomical.  Gore’s call to action may help considerable to raise a green star over China.

Related Information:

A number of other commentators have written on China’s Green potential as a business opportunity. Here are a couple of articles that I recommend:

China: A Clean-tech gold rush

China’s Coming Environmental Renaissance

China’s Green Leap Forward

China’s Silver Lining

A possible Olympic legacy: A greener China

Categories: China Supertrends, Drivers of the Drivers, Greening, Pro-business Policy
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This week in Japan, the G8 leaders pledged to cut greenhouse gas emissions by 50 percent before 2050. In the same week, China announced it would immediately cut more free plastic bags. What is the main point of difference between these countries’ environmental policies? It could be summarized thus: More talk versus real action.

The G8’s move to cut greenhouse gases (primarily CO2) by 50% was immediately decried by some environmentalists and tagged as insufficient by the group of developing countries, including China, on the sidelines of the summit.

For example, the pledge didn’t even make clear whether the cut was to be from 1990 levels (as is the general practice of the UN and the Kyoto Protocol when measuring emissions reductions) or present levels, which would significantly decrease the impact of the pledge. The US in particular has increased carbon emissions in the subsequent 18 years by 20%. From a BBC report:

…the US has refused to set any interim targets for cutting emissions - and environmentalists have criticised the progress at talks as “pathetic”.

Five of the world’s biggest emerging economies said the G8 should increase its targets to more than 80% by 2050.

China, India, Mexico, Brazil and South Africa - who will join talks on Wednesday - also urged developed countries to commit to an interim target of a 25-40% cut below 1990 levels by 2020.

Meanwhile, in China, the Ministry of Commerce on July 11 announced changes to the plastic bag ban policy. Effective immediately, restaurants, bookstores, and clothing stores will also be required to eliminate free plastic bags, charging customers for each one issued. In fact, this was a clarification of the already-implemented plastic bag ban law, which came into effect on June 1 this year.

Is Red China Becoming Green?

One law eliminating free plastic bags does not a green country make, but I believe that China’s environmental policy is frequently unfairly derided by critics as unenforced. In fact, such a broad generalization is inaccurate: Here in Shanghai, it’s true that not every store has implemented the policy at present, and it seems many of the aforementioned clothing, restaurant and bookstores presumed the law was meant to apply to groceries only, but this loophole has now been closed. In hypermarts, supermarkets, and convenience stores, it is already impossible to get free plastic bags, so I expect the new revision will take effect quickly in restaurants and other venues.

In our new book Supertrends of Future China, we cover the plastic bag ban law as an example of China’s new environmental movement and the central government’s willingness to put its words into action. The G8 really should pay more attention instead of just making more hollow promises.

Related information:

For more details on the plastic-bag ban update, the resourceful China Environmetal Law blog has a post on the matter, describing the hitherto unknown-to-me existence of ‘produce department hooligans.’

Categories: China Supertrends, Drivers of the Drivers, Greening, Pro-business Policy
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