The Chinese spend billions of dollars each year modernizing the way they process and deliver water.

In 2007, approximately 280,000 Chinese children under the age of five died from preventable diseases caused by lack of clean drinking water.

According to the UN, contaminated drinking water causes five times the number of child deaths than are caused by HIV/AIDS.

More than 300 million rural Chinese citizens lack access to clean drinking water. Sewage is often dumped into the fields, creating a breeding ground for disease in rural China.

The World Bank estimates that health and environmental problems cost the Chinese about $50 billion a year.

Is it any wonder that the Chinese are spending tens of billions of dollars each year modernizing the way they process and deliver water?

As investors, we are now used to big infrastructure stories coming out of China. New skyscrapers, highways, modern mass transit, all drive the commodity boom. But the water opportunity is launching a tidal wave of investment that may swamp them all.

Unlike the demand for stereos, cars, or cell phones, no economic downturn is going to decrease the demand for water infrastructure. There are 1.3 billion people in China. They all drink water. They all don’t have clean water. It’s just that simple.

China water resources are vast. It has the same amount of water as Canada, but 40 times the population. Approximately 400 out of 600 cities in China are facing water shortages, including 30 out of the 32 largest cities.

Some resource analysts talk dramatically of “Peak Water” – as though it were similar to our usage of oil. But the situations are very different. For one thing, we are not running out of water. It is never technically “used up.” It simply changes forms.

Approximately 97% of the water on the planet is undrinkable, and that’s the key here.

When we talk about investment opportunities in water, we are not talking about how to monetize a dwindling resource, like oil. We are talking about distribution. Getting drinkable water to where it can be used.

This is China’s big problem. And there are already a few companies profitably supplying some solutions. Jean-Michel Herrewyn, CEO of Veolia Environmental (NYSE: VE, Stock Forum), says, “There is fantastic growth potential in Asia due to water scarcity and the fact that people are living in bigger cities.”

Mr. Herrewyn should know. Veolia is quickly becoming a key partner in helping China with its emerging water crisis. Veolia provides wastewater services, operates drinking water plants, and builds wastewater decontamination and recycling plants. Last year, it had revenues of $51 billion. Veolia didn’t get to be that big by stumbling around in the dark. They think big and go after big opportunities. They’re heavily focused on the water sector.

Of course, big companies like Veolia rarely provide the massive upside that risk-tolerant investors are looking for.

Forget oil, this is China's biggest shortage