A visit to any major city in China will show that it is under reconstruction—a result of rapid economic growth and a government push to upgrade its infrastructure (Exhibit 1). But while foreign contractors have mouth-watering opportunities, there are also pitfalls for the unwary. Two areas, though, offer an agreeable combination of sustained construction work and profit potential: subway systems and water supply and wastewater-treatment facilities (Exhibit 2).
Where are these opportunities to be found? According to China’s latest five-year plan, 34 cities with populations upward of a million will need subway systems. More fundamental is the need for water. At 96 tons1 per person each year, current water consumption is far below the developed world’s level of 300 tons, yet 450 of China’s 650 cities suffer from water shortages. And with the country projected to generate 100 billion cubic meters (130.8 billion cubic yards) of wastewater a year by 2010, as many as 1,800 additional water-treatment plants will be required.
Officials recognize that China can’t go it alone in construction projects if it is to achieve its national-development goals, though sensitive sectors, such as telecommunications, remain off-limits to foreigners. So we looked at the roles that overseas...