China begins work on world’s largest hydropower dam near Tibet

SHANGHAI: China has started building what is expected to become the world’s largest hydropower dam, located on the eastern edge of the Tibetan Plateau. The project, which carries an estimated cost of over $170 billion, was officially announced by Chinese Premier Li Qiang, according to state media outlet Xinhua.

This massive development is being described as China’s most ambitious energy project since the construction of the Three Gorges Dam. News of the launch sparked optimism in Chinese markets, with stocks and bond yields climbing on Monday as investors saw it as a sign of renewed economic stimulus.

The project will feature five cascade hydropower stations and is designed to generate 300 billion kilowatt-hours of electricity annually, roughly equal to the total electricity consumed by the UK in a year. The dam will harness power from the lower reaches of the Yarlung Zangbo River, where the water plunges 2,000 metres across just 50 kilometres, offering huge potential for energy generation.

However, the project is already raising alarms in neighbouring countries. India and Bangladesh, both downstream, have voiced concerns about its impact on water availability for millions of people. Environmental groups have also warned that the dam could damage one of the most biodiverse regions on the Tibetan Plateau.

Beijing has assured that the project will meet energy needs in Tibet and other parts of China without significantly affecting downstream water flows or harming the environment. The dam is expected to become operational sometime in the 2030s.

The announcement triggered a surge in Chinese construction-related stocks. The CSI Construction & Engineering Index jumped by as much as 4 per cent, reaching a seven-month high. Shares of Power Construction Corporation of China and Arcplus Group PLC hit their daily 10 per cent gain limit.

“From an investment point of view, mature hydropower projects can offer steady, bond-like returns,” said Wang Zhuo, a partner at Shanghai Zhuozhu Investment Management. However, he warned that overly speculative buying could push stock prices beyond fair value.

Analysts at Huatai Securities noted that the project will likely boost demand for cement, civil explosives, and other construction materials. Tunnel equipment maker Hunan Wuxin Tunnel Intelligent Equipment Co saw its shares surge 30 per cent, as did Geokang Technologies, a manufacturer of monitoring systems. Cement producer Xizang Tianlu Co Ltd and explosives firm Tibet GaoZheng Explosive Co both jumped the maximum 10 per cent.

Premier Li has described the dam as a “project of the century” and called for strict ecological safeguards during its construction. Xinhua reported that environmental protection would be a top priority.

The news also impacted the bond market. Government bond yields rose on Monday, with 30-year treasury futures dropping to five-week lows, reflecting expectations of higher public spending. The dam is being developed by the newly established, state-owned China Yajiang Group as part of efforts to lift slowing economic growth.

Citi analysts estimate that if the project spans ten years, it could add around 120 billion yuan (about $16.7 billion) to China’s GDP in a single year. They added that the broader economic benefits might be even greater.

So far, the government has not revealed how many jobs the dam will create. For comparison, the Three Gorges Dam created nearly a million jobs, though it also displaced a similar number of people. No official figures have been shared on possible displacement from the Yarlung Zangbo project.

The river becomes the Brahmaputra as it flows from Tibet into India and then to Bangladesh. NGOs warn the dam could permanently alter the fragile ecosystem of the Tibetan Plateau and negatively affect millions downstream.

Earlier this year, Arunachal Pradesh Chief Minister Pema Khandu raised concerns, saying the dam, located just 50 kilometres from the Indian border, could reduce water flow by up to 80 per cent in the Indian section of the river. He also warned of flooding risks in Arunachal Pradesh and neighbouring Assam.

Experts have also pointed out the seismic risks involved, as the project lies in a region known for its earthquake activity.