I travelled to China for the first time in 1990 on Microsoft business and have been back many times since. One very memorable trip was in 1995 with Melinda, my father and Warren Buffett. We rode the trains and traveled around as tourists for several weeks – it was an incredible trip and a lot of fun.
My recent trip was unique and especially exciting, as I had the opportunity to do work that spans my various interests. I met with our team at Microsoft Research Asia, where I saw some incredible innovations in search and related technologies. I also met with a number of vaccine companies that are working with our foundation. For the last part of the trip, I joined Warren Buffett, Charlie Munger and other Berkshire Hathaway board members. Our main focus was a visit to BYD, an incredible company in which Berkshire owns a 10 percent stake. BYD fully lives up to its name, which stands for Build Your Dreams. It manufactures batteries, electric and hybrid cars and buses, and many highly innovative green products.
The meetings with vaccine manufacturers were about the potential for expanding development of new vaccines in China for use worldwide. Historically, most important vaccines have originated in Europe and the United States. Now, countries like Brazil, India and China are providing lower-cost versions of some of them. Ideally, they’ll also get involved in inventing new vaccines. Because these countries suffer from many of the infectious diseases that we need new vaccines for, local development could help speed vaccine dissemination. Also, because countries like China have experience in making low-cost vaccines, they could be better at designing new ones in ways that make them low in cost from the very beginning. That would be wonderful.
And so the foundation is reaching out to new vaccine companies, seeing how we can help them and what holds them back. This was my first visit with some of the companies in China. I was impressed at how quickly the industry is moving ahead. They really understand low-cost manufacturing, and they're getting their quality up to world standards. Over the next five to ten years, they have the potential to create many breakthrough vaccines, as well as to help get current vaccines to the world’s poorest people, for whom price can be a significant obstacle.
Specifically, the foundation is trying to make sure that every child in the world gets three vaccines: pentavalent (against diphtheria, tetanus, whooping cough, hepatitis B and influenza B), rotavirus (against severe acute gastroenteritis) and pneumococcal (against pneumonia). Together, these three could reduce child deaths by almost one million per year. If we can get their cost down, then we'll be able to get all three to even the poorest children in the world. It looks like China could help out on low-cost rotavirus and pneumococcal. So we have possibilities there, as we do in India and Brazil.
Gearing up to manufacture vaccines that meet international standards is a costly and complex process. In China we saw a flu vaccine manufacturing line that is unique in that it involves growing flu virus in chicken eggs. The plant has to buy a huge number of eggs and make sure they're all sterile. It's quite a process, and people worry that, in the event of a big epidemic, they might not be able to buy enough eggs and grow the virus quickly enough. But in our visit to Sinovac Biotech, headquartered in the Beijing University Biological Industry Park, we saw that it has really distinguished itself by rapidly building up its flu vaccine capability. That was quite impressive.
I love any excuse for spending time with Warren Buffett, whether we’re playing golf (which neither of us is very good at) or playing bridge, which we're kind of just okay at.
Our visit to BYD was amazing. The company was started back in 1995 by a battery expert. It grew to be very strong in phone batteries and car batteries, and then, in 2003, BYD decided to make its own cars. It has about six percent of the domestic car market and plans to expand its product line and volume quite dramatically. It's an innovative company, pushing forward on battery technology, doing electric taxis, electronic buses and electric storage systems.
BYD has created an entirely electronic bus using special batteries and a special electronic motor. The company has innovated to bring the battery cost down and the battery life up. If it works as well as planned, the operator saves enough on fuel to be able to pay quite a premium for the bus. We rode around on a prototype and participated in a ceremony where a local city committed to buy a thousand of these buses. They will be a huge help in reducing the smog in Chinese cities and could even help start to reduce CO2 emissions.
BYD headquarters is in Shenzhen, in the southeast part of China next to Hong Kong. Shenzhen is where the Chinese economic miracle started; it was a special economic zone. So I wasn't surprised to see a lot of modern buildings and a pretty impressive car factory. But I was blown away when I heard how quickly they put up the buildings. In the U.S., you just can't build nearly as fast.
What was even more amazing was to go to a city in the middle of China, Changsha, which has six million people, and see a new factory that will turn out 400,000 cars a year. It was built in less than two years from start to completion. Around the city, new high-rise buildings are going up where only cornfields stood just a few years ago. You hear about China’s 10-percent annual economic growth, but to fully understand you really have to see it in person. China is moving at incredible speed.