BEIJING:
China has started construction on what is set to become the world’s largest hydropower dam, located on the eastern edge of the Tibetan Plateau. Premier Li Qiang confirmed the project’s launch, which carries an estimated cost of at least $170 billion, according to state news agency Xinhua.
This marks China’s most significant hydropower undertaking since the massive Three Gorges Dam on the Yangtze River. Financial markets welcomed the news as a major economic stimulus, with stock prices and bond yields climbing sharply on Monday.
The project comprises five cascade hydropower stations with a combined capacity to generate around 300 billion kilowatt-hours of electricity annually—roughly equal to the total power consumed by the United Kingdom last year. The dam is being built along the lower reaches of the Yarlung Zangbo River, where the water drops nearly 2,000 meters within just 50 kilometres, offering immense potential for electricity production.
However, India and Bangladesh have voiced concerns over the dam’s possible effects on the millions of people living downstream. Environmental groups have also warned that construction threatens to severely damage one of the most biodiverse and ecologically sensitive areas on the Tibetan Plateau.
China, on its part, insists the project will secure energy supply for Tibet and other regions without causing significant disruption to water flows or the environment. The dam is expected to become operational sometime in the 2030s.
Following the announcement, China’s CSI Construction & Engineering Index surged by 4% to a seven-month high. Shares of Power Construction Corporation of China and Arcplus Group PLC hit their daily upper trading limits, each soaring by 10%.
“Mature hydropower projects often provide bond-like returns for investors,” noted Wang Zhuo, a partner at Shanghai Zhuozhu Investment Management, though he warned that excessive speculative buying could inflate stock valuations beyond fundamentals.
The dam’s construction is also expected to boost demand for building materials and equipment, such as cement and civil explosives. Tunnel construction equipment supplier Hunan Wuxin Tunnel Intelligent Equipment saw its share price jump by 30%, while Geokang Technologies, which produces intelligent monitoring terminals, posted similar gains. Cement producer Xizang Tianlu Co Ltd and Tibet GaoZheng Explosive Co Ltd, a major civil explosives manufacturer, both rose by the maximum 10% allowed in daily trading.
A Project of the Century
Premier Li Qiang described the dam as a “project of the century,” emphasizing that strict ecological protection measures must be enforced to prevent environmental degradation.
Investors viewed the announcement as a signal of broader economic stimulus, pushing up government bond yields across the board. Most notably, 30-year treasury futures fell to five-week lows.
The massive infrastructure initiative, managed by the newly created state-owned China Yajiang Group, represents a significant increase in public sector investment at a time when China is seeking to revive economic momentum amid signs of slowing growth.
According to a research note by Citi, if construction spans ten years, the project could contribute as much as 120 billion yuan ($16.7 billion) annually to GDP, with wider economic benefits likely exceeding that estimate.
Authorities have not yet revealed how many jobs will be created through this venture. The Three Gorges Dam project, which took nearly two decades to complete, is reported to have generated close to one million jobs—although it also displaced a similar number of residents. Officials have not disclosed how many people might need to relocate due to the Yarlung Zangbo dam.
Environmental organisations continue to caution that the dam could cause irreversible harm to the fragile ecosystems of the Tibetan Plateau and threaten water security for millions of people downstream in India and Bangladesh. The Yarlung Zangbo River eventually becomes the Brahmaputra after entering India, before flowing onward into Bangladesh.
