Day 1: The China Access September Program
The program kicked off a great note on the top floor of the Beijing Grand Hotel, with representatives from creative and financial companies in Australia, New Zealand, Canada, and the US, all gathered to receive a crash course in a variety of China's emerging markets from Alan Carroll, Executive Chairman of the Pacific Rim Forum.
Energy Markets
One large power plant per week for ten years: that's the rate that China needs to grow its energy output in order to keep up with its surging demand for energy, set to triple by 2020. With the rapidly growing need for infrastructure, as well as the need for more sustainable practices as air pollution and water shortages become critical issues, China is poised to become the staging ground for innovation in the energy sector.
China is currently investing $200 billion USD a year (roughly 9% of GDP) on infrastructure, including an expansion of the nation's railway network by 35% and tripling the nations highway network by 2030. To compliment this growth, China formally announced early in 2006 that the government plans to spend $15 billion USD to build plants that will manufacture 16 million tons of oil products each year from coal over the next five years. They have also announced the goal of meeting 5% of their energy demand from nuclear power by 2020.
Shenhua Group took the lead in the coal liquefaction process. In August 2004, it embarked on an ambitious direct coal liquefaction project, the first of its kind in the world, in Ordos, northern China's Inner Mongolia Autonomous Region.
According to China's official government web portal:
"The project is designed to have an annual capacity of five million tons. Estimated at 24.5 billion yuan ($3 billion US), it will be undertaken in two phases. The first, designed to produce 3.2 million tons of oil products, is scheduled for production by 2007. The second phase is scheduled for production by 2010, with a designed annual production capacity of 2.8 million tons.
Other major coal producers have followed suit. In February 2006, a coal liquefaction project with a designed initial annual capacity of 160,000 tons was launched by Lu'an Group in Tunliu, Shanxi Province.
Two months later, Yankuang Group initiated a huge two-phase coal liquefaction project in Yulin, Northwest China's Shaanxi Province, which will involve a total investment of 100 billion yuan ($12.5 million US). The project is expected to reach an annual output of 10 million tons of oil products by 2020."
Coal liquefaction is the process of making liquid fuels from coal and involves the manufacture of synthesis gas (CO and H2) from coal and has been seen as an excellent alternate to unstable foreign oil supplies.
China's most pressing concern, however, may be their water supply. With only 1/3 of the worldwide average supply of water (per head of household), 2/3 of China's main cities are already regarded as seriously short of clean water, according to the WHO. China is seeking to remedy this problem with the construction of the Three Gorges dam and improvements in conservation and efficiency in manufacturing processes.
To answer these pressing needs, China will be a key market for emerging technologies in the energy sector - anyone with new technologies or strategies for energy production can't afford to not be in China in the next 5 years.
Changing gears, the conference attendees also received important insight on China's emerging software and biotech markets from Nathan Zhang, CEO, Sinocro Partners; Joshua Tan, Professor, Centre for Information Science, Peking University; and Hua Ding Lan, VP of the China Computer Users Association, VC of the China Software Industry Association, and Chair of the Beijing Software Industry Association.
Traditionally, China has not been seen as a global leader in the software industry, especially when compared to the United States and India. A look at the numbers, however, paints a different picture. China accounts for 6% of the world's software industry (India only accounts for 5%). China's software market, though large, is still very much in development with thousands of small to medium sized companies catering largely to domestic demand. In Beijing alone, there are more than 5000 software companies.
Unlike the Western software market, which is led by a small number of giant companies, the top 100 software companies in China only make up 30% of the industry's total income and there are no software companies in China with over 6,000 employees. As the market matures, these figures are sure to change, but for now, China is poised to meet its incredible domestic demand for technology and software.
Another major concern with software development in China has been the lack of regard for intellectual property rights in China. With further development of the market due to growing demand and government support, this is looking to improve rapidly. Currently, Chinese software developers are combating the problem by embracing open source tools such as Linux.
Perhaps the most important thing to recognize about China's software market is that they are mostly focused on meeting their domestic demand. Because of the inherent differences in language structure, China is best suited to develop intuitive software for their home market, rather than convert English software to Chinese or convert Chinese software to English for export. China is also less focused on outsourcing for software development. Where outsourcing is a $30 billion USD industry for India, it only accounts for $3.6 billion USD in China. With the largest developing market for software in the world, Chinese software companies have much to gain by focusing on meeting their domestic demand instead of relying on outsourcing.