GDP growth of the Chinese economy in 2008 is estimated to be circa 10%, and even in the present global financial crisis is expected to remain around 8% in 2009. The Chinese market consists of circa 200 million families described as “middle class” consumers, and an increasingly affluent educated youth segment, which suggests that well-managed companies with innovative products should be able to rapidly achieve and then sustain high double-digit growth. Services based on new, especially wireless, technologies, are increasingly attractive in a market with over 200 million internet users, over 500 million mobile phone users and the imminent roll-out of 3G networks, is likely to spur new growth in services requiring greater wireless bandwidth.

In line with the growth of its economy, China has invested heavily in R&D. According to the 2006 Batelle Report on R&D, spending on research and development in China has been increasing at an annual rate of 17%, (2001-2006).

Since one of China IPO’s objectives is the commercialisation of IP, the increased emphasis in China on IPR protection is important: In the first six months of 2007, according to the State Intellectual Property Office, there were 216,467 applications for domestic patents and 52,453 applications for international patents, a significant increase when compared to a year-end total for 2004 of 278,943 applications for domestic patents and 74,864 for international patents and. Several Chinese research programmes for the next five years will have a important emphasis on IP and technology development. For example, the 11th Five-Year Plan for space development approved in the summer of 2007 emphasises manned space flight, lunar exploration, and high-resolution earth observation. Research is expected into short-term manned and long-term autonomously orbiting space laboratories, space astronomy, space physics, micro-gravity science, and space life science. In September 2007, targets were set by the MOST to reduce energy consumption per unit of GDP by 20 per cent and reduce major pollutant discharges by 10 per cent, with the focus on pollution control and prevention. The Directors believe these programmes will have an impact on research in several areas in which the Partner Incubators are involved.

Notwithstanding the large numbers of companies undertaking R&D and pursuing IPR protection, there are relatively few channels to facilitate linking new and innovative companies with investments and markets both inside and outside China and to provide support in the commercialisation of new assets deriving from this increased focus on R&D. The Directors believe that there are opportunities for a business directed at partnering with Incubators to provide them with investment and technology transfer expertise in exchange for receiving equity interests in the target companies.