- The Washington Times - Saturday, February 18, 2006

Many workers, executives and political leaders in the United States and other industrialized nations see the advancing Chinese behemoth as an economic threat. Perhaps they should see China as the West’s new land of opportunity.

According to Chinese news reports, vetted by the government, China expects to build more than 300 new cities over the next five years, bringing the total number of Chinese cities with populations over 200,000 to 1,000. By contrast, the United States has maybe 125 or so. By 2010, nearly 200 Chinese cities will have populations of a million or more.

To the West, this is an opportunity. By 2050, the United Nations now estimates, 7 in 10 Chinese will live in cities. For every 1 percent increase in China’s urbanization rate, the country must add some 3 billion to 4 billion square feet of new housing, pump 182 million cubic yards of potable water, generate 640 million kilowatts of energy, and spend some 260 to 270 billion yuan ($35 billion). It also must dispose of 1.5 billion cubic yards of wastewater each year.

These are staggering challenges. And China is not alone. Similar dynamics are at play in India, Indonesia, Eastern Europe and other developing countries.

Growth and globalization change everything, and the current scope and speed begin to test the limits. Just imagine the infrastructure needed to support 800 million new urbanites around the world and the sprawling industrial plants and logistics networks that will tie them into the global economy.

China and other rapidly developing countries are ill-equipped to go it alone. Besides, many of their most pressing needs fall in exactly those areas where Western companies excel: low-polluting electric power generation, commercial aircraft, telecommunications, waste disposal, natural resource management, water quality.

Western companies also can help build new housing, roads, ports, airports, medical facilities and other infrastructure needs.

One of the developing world’s greatest needs will be capital. We estimate China and other rapidly developing economies will need about $1.7 trillion-$2 trillion annually in investment capital, much of it now waiting for the next big opportunity.

The speed of today’s economic and social changes is unprecedented. The creativity needed to keep up with such change also is unprecedented.

Technology is not the only realm requiring creativity and rapid innovation. World financial markets and institutions also must adopt new strategies, create new products and adapt to rapid change, as they have many times in the past.

Twenty years ago, who had heard of Real Estate Investment Trusts (REITs) and hedge funds? In the next 15 years, we will see other new financing instruments and arrangements.

New investment alternatives might, for example, enable investors to finance part of a project or of a group of projects — selected, perhaps, by sector (housing, road building, waste water treatment), by date of maturity, or in ways not yet contemplated or understood.

All these devices and arrangements will have certain common characteristics: They will enable investors to “bundle” their investments across geographical borders in new ways that minimize risk and maximize returns.

While China is the current focus of globalization, the bigger story is the unseen opportunities globalization is creating for both developing and developed economies.

Regardless of where a country sits economically, globalization is likely to bring growth: new development for countries on the rise, redevelopment for countries like the United States, Japan and Germany and new opportunities for all.

Globalization will fuel the global economy; strategy and innovation will define the winners.

Dave Young is a senior adviser and Antonio Riera is a senior vice president of the Boston Consulting Group, which has offices in Washington, D.C., and 59 other cities in 36 countries.

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