From pollution tracking apps, ‘escape the smog’ travel deals, and even premium bottled air, discover the companies behind China’s anti-pollution business boom.
Much has been written about China’s pollution crisis. This state of affairs has led to myriad problems for China, as the government seeks to promote more sustainable growth. In the midst of all this, the severity of China’s pollution nightmare is inspiring corporate dreams, as both multinationals and a slew of startups cash in. Even China’s fashion industry is incorporating gas masks as the haute couture accessory of the year.
This boom has already produced China’s first green-tech billionaires: Zhang Kaiyuan, chairman of Beijing SPC Environmental Protection Tech. Co., and Ao Xiaoqiang, chairman of Beijing SDL Technology Co. Both companies have seen their stocks jump by more than 180% over the last two years.
China is home to many of the world’s most polluted cities, notably Beijing where “Chinese scientists have warned that toxic air pollution is now so bad that it resembles a nuclear winter.” Pollution is one of the leading causes of public discontent in China. Consequently, the government takes the issue very seriously, as domestic stability is its paramount concern.
Pollution forecasting a major growth industry
One area that the Chinese government is investing in is pollution forecasting. To this end, both IBM (NYSE:IBM) and Microsoft (NASDAQ:MSFT) have signed contracts in the fast growing market of air quality forecasting. Using emerging cognitive computing technologies developed in its China-based research labs, IBM secured its first government contracts in 2014. Specifically, IBM launched the Joint Environmental Innovation Centre in conjunction with the Beijing Environment Protection Bureau in December 2015.
IBM has also partnered with the city of Zhangjiakou – the co-host for the 2022 Winter Olympics – to do air quality modeling and planning ahead of the games. Similarly, Microsoft has signed up the Chinese environment ministry as a client, and is promoting Urban Air, its air quality app which provides pollution predictions 48 hours in advance (current government sites only provide 24 hour notice).
Microsoft is already facing competition from Chinese startups such as Beijing-based Air Visual; a crowd sourced pollution monitoring start-up which provides three day predictions via its website and app. These apps join others, such as the China Air Quality Index (originally DirtyBeijing) created by Fresh Ideas, another Beijing based start-up in 2011. Co-founders Zhang Bin and Wang Jun came up with the idea while working at Baidu – China’s top search engine. Zhang recalls that:
It was mid-October 2011, and the air quality in Beijing was quiet bad, as you may imagine. It came to my mind that if could check the air quality on our smart phones and receive pollution notifications that would be quiet helpful and handy.
Fresh Ideas has since grown into a promising venture, with its app (pictured) – available for iOS and Android – having been downloaded five million times and sporting 300,000 daily active users. This success has not come without its own problems, forcing Zhang and Wang to keep a low profile.
The initial company name angered the government, as did their inclusion of air quality readings from the U.S embassy in Beijing. The American data is considered more accurate, and often showed glaring disparities in comparison to China’s official pollution readings: the government has since censored the U.S readings.
Escaping the smog
Fresh Ideas is not the only company taking advantage of the country’s pollution problem to run afoul of the Chinese government. In March 2014, Chinese regulators ordered the country’s two largest insurers to stop selling smog insurance. People’s Insurance Company of China (PICC) had offered Beijing residents 1,500 yuan ($240) payouts if they were hospitalized due to smog. Similarly, Ping An Insurance Group offered travelers a daily 50 yuan compensation if they visited a smoggy city for more than two days.
Ping An even partnered with Ctrip (NASDAQ:CTRP), a Chinese travel agency to promote “clean air getaways.” Despite the government axing the aforementioned insurance plans, Ctrip has continued its own promotional deals. The company reported that its December “smog escape routes” promotion did very well, as 60% of Chinese cities experienced high pollution levels during the holiday season.
Ctrip spokesperson Yan Yin explains the interplay between pollution levels and travel industry trends in China, as “searches on our app and website rise in pace with smog levels. Many customers moved their departure dates forward or switched from domestic to international destinations to escape the severe air pollution.”
Pollution crisis spurs ‘green’ business boom
There has been pollution driven gold-rush in China in recent years, as pollution awareness enters popular culture. One of the most popular films in China in 2015 was Under the Dome: an independent pollution documentary released online which garnered more than 100 million views in 48 hours.
Lia Shensheng, a Shanghai based environment analyst with Capital Securities Corp, has noticed the momentum – “the influx of capital is especially strong this year because of the huge reaction brought by the documentary.”
Pollution driven consumption trends have also been confirmed by Taobao, China’s Ebay (NASDAQ:EBAY). In December 2013, during extreme pollution levels, Taobao saw a week on week increase of 267.5% in air purifier sales, up 1264.4% from a year before. Similarly, sales for face masks saw a weekly jump of 173%. Air purifiers can cost Chinese consumers the equivalent of hundreds, even thousands of dollars, with foreign brands such as Siemens, Philips, and Daikin the top sellers.
This demand only grew in 2015, drawing new players, such as Texas-based start-up Oransi, which is selling $2000 dollar boutique air purifiers to China’s growing HNWI market. Many Chinese view air purifiers as healthy living purchases, a fact that many companies are cashing in on, despite the fact that the FDA does not regulate air purifiers, as it currently does not consider them medical devices.
On the other end of the price spectrum, local businesses across China are also cashing in on consumer concerns about air pollution. For instance, in Zhengzhan, several botanical stores have turned a tidy profit selling plants that allegedly filter out hazardous PM2.5 particles. In a similar vein, a restaurant in Zhangjiagang installed an air purification system and has added a clean air surcharge to its prices.
Ultimately, the success of one company perfectly embodies the wild west which is China’s anti-pollution market. Vitality Air is a Canadian start-up which sells well, air. The company – which touts its products as “your solution to pollution” – bottles pure mountain air from Banff and Lake Louise in Canada, selling it at $28 per bottle. Two months ago the company started shipping its products to China, and has met with startling success. Harrison Wong, the company’s China spokesperson recalls that the minute the bottles went on sale on Taobao, they sold out almost instantly.
Many have written of the economic costs of pollution in China, yet for the bottom line of some companies, the outlook is anything but gloomy.