Tickers in this Article: GII, FLM, BGC, ABB, ETN, HOLI, VMI, GRID
While Europe continues to grapple with its debt crisis and the United States deals with its "do nothing" policy makers, the state of the developed markets infrastructure continues to deteriorate. Analysts estimate that over $2 trillion needs to be spent by developed markets over the next five years in order to repair their aging economic backbones. However, with many developed markets facing austerity plans and budget cuts, this vital spending could fall by the wayside. With much work to be done, developed markets infrastructure could be seeing investment from an emerging source. (For related reading, see Top 6 Factors That Drive Investment In China.)

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China Steps Up to the Plate
After spending record amounts on its own infrastructure build-out, China could be ready to assist the developed west. The $410 billion Chinese Sovereign Wealth Fund (CIC) now plans to invest in the infrastructure of developed countries, starting with the United Kingdom. A variety of Chinese officials have been demanding that the nation begin diversifying the country's $3.2 trillion worth of foreign exchange reserves into real assets. Already, China has begun buying gold in spades. The next logical step would be real estate and infrastructure assets in the developed world.

Recently, CIC chairman Lou Jiwei said to The Financial Times that the fund was looking to participate in public-private-partnerships in the United Kingdom. This echoes similar statements from Chinese Commerce Minister Chen Deming. He was quoted saying recently that "China should help rebuild U.S. infrastructure and invest in clean energy and technology there." China has traditionally been only a contractor for infrastructure projects in the developed west, but now the country is willing to be both investors and owner/operators.

While China hasn't actually put a dollar figure on its future infrastructure investments, the precedent for a large investment is certainly there. Over the last decade, the Asian superpower has invested large sums of money into African infrastructure projects, currently around $6 billion a year in 2005-2006 according to data from the World Bank. China has built more than 2,000 km worth of railways, 3,000 km of highway as well as plethora of schools, hospitals and water systems in Africa. Beijing has already expressed interest in a $32 billion high-speed rail line connecting London and North England, according to British policy markers. The CIC is eye-balling similar toll-road and bridge improvements in the United States. (To learn more, Should You Invest In Emerging Markets?)

Playing China's Ambitions
China's potential developed market infrastructure investments could provide large economic as well as personal portfolio boosts. For investors, adding infrastructure assets makes sense. The public-private partnerships that China wishes to invest in will benefit both domestic and international firms. Both the First Trust ISE Global Engineering & Construction (ARCA:FLM) and SPDR FTSE/Macquarie Global Infrastructure 100 (ARCA:GII) offer broad plays on this theme and could be used as proxies.

One area in which the CIC believes the United States should focus its efforts is on improving its electrical grid and super high-voltage transmission lines. General Cable's (NYSE:BGC) stock has fallen pretty hard over the last six months in the wake of poor earnings. However, the company is the high-voltage cable leader and represents an interesting value at these levels. The company can be had for a forward P/E of around 8. Similarly, electrical grid supply firms ABB (NYSE:ABB) and Eaton (NYSE:ETN) are now in bargain range as well.

China's fondness for high-speed rail could also be a source of profit for investors. Firms like Hollysys Automation (Nasdaq:HOLI), which produces a host of train-related control software and automation solutions, as well as Valmont Industries (NYSE:VMI), which produces electrical towers for light rail, should benefit.

The Bottom Line
As the governments in the developed west continue to grapple with budget cuts and stalemating legislative sessions, the U.S. infrastructure continues to age. However, China could be coming to the rescue. The nation has recently expressed interest in investing and improving the dilapidated economic backbones of the United States. For investors, funds like the First Trust NASDAQ Smart Grid Infrastructure (Nasdaq:GRID) could be great buys for the upcoming year as China takes out its checkbook. (For related reading, see Investing In China.)

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At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

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