How can redevelopment efforts in China's cities improve life for their residents, whose expectations are constantly rising, while promoting job creation and economic growth? Many places in the developed world face this challenge, but the scope and scale of China's task are unprecedented. As a result of shortfalls in government financing, cities are breaking taboos by involving the private sector in the planning process. Hundreds are now vying for private commercial investment, thus obliging officials to consider, for the first time, the impact of market forces.

The plan for a new business district in the central Chinese city of Wuhan, which has 8.3 million inhabitants, offers a look at how one metropolitan area has tackled redevelopment. Smokestack industries such as auto manufacturing and steel dominate the local economy. The service sector accounts for less than half of the city's GDP, compared with more than 70 percent in the West's urban centers.

During the late 1990s, local officials realized that a large tract of land near the city's heart, in the Wangjiadun district, offered a unique urban-redevelopment opportunity. With Wuhan's population growing and a limited amount of land available in the center of town, the government saw a chance to spur...