Home Depot is setting up a business development unit to extend its growth overseas, and has recently selected China's emerging market as the best environment for new expansion. The leading U.S. do-it-yourself home-improvement retailer estimates the China home market at $50 billion a year and growing.

Market analysts suggest that Chinese homeowners will certainly be in need of the power tools, caulk, ceramic fixtures and home furnishings Home Depot supplies to decorate spaces. Growing automobile ownership is giving rise to suburban development in China's coastal areas, and the Home Depot Asia division claims that about 70 percent of home-improvement spending in China is on decorating new homes--and that gives Home Depot a solid growth opportunity.

The market in China looks promising, but retailers' international expansion is often fraught with pitfalls, and there are relatively few shining success stories. That reality doesn't seem to be causing Home Depot any trepidation. Executives at the company believe the potential payoff dwarfs any risks, especially at a time when China's emerging market is in a period of rapid growth. "China is in an explosive period," Home Depot Chairman and Chief Executive Bob Nardelli said at a recent company meeting. "It represents a significant opportunity to get in early and get in on that growth."