China embarks on world’s largest hydropower dam, capital markets cheer
China’s Premier Li Qiang has announced that construction had begun on what would be the world’s largest hydropower dam on the eastern rim of the Tibetan Plateau, the country’s official Xinhua news agency reported — sending stock prices and bond yields higher on Monday.
The commencement of the hydropower project at an estimated cost of at least $170 billion, China’s most ambitious since the Three Gorges Dam on the Yangtze, was seized by Chinese markets as proof of economic stimulus.
Made up of five cascade hydropower stations with the capacity to produce 300 billion kilowatt-hours of electricity annually, equal to the amount of electricity consumed by Britain last year, the dam will be located in the lower reaches of the Yarlung Zangbo. A section of the river tumbles 2,000 metres in a span of 50km, offering huge hydropower potential.
India and Bangladesh have already raised concerns about its possible impact on the millions of people downstream.
China asserts that the project has undergone rigorous scientific evaluation and will not adversely affect the ecological environment, geological stability, or water resource rights of downstream countries. Beijing has also emphasised that it will not try to benefit at the “expense of its neighbours”, South China Morning Post reported.
The dam has reportedly prompted India to speed up its own hydropower projects on the Brahmaputra in Arunachal Pradesh to assert water resource rights, the Hong Kong-based daily added.
China’s CSI Construction and Engineering Index jumped as much as 4 per cent to a seven-month high. Power Construction Corporation of China and Arcplus Group surged by their 10pc daily limit.
“From an investment perspective, mature hydropower projects offer bond-like dividends,” Wang Zhuo, partner of Shanghai Zhuozhu Investment Management, said, while cautioning that speculative buying into related stocks would inflate valuations.
The project will drive demand for construction and building materials such as cement and civil explosives, Huatai Securities said in a note to clients.
Shares of Beijing-listed Hunan Wuxin Tunnel Intelligent Equipment Co, which sells tunnel construction equipment, surged 30pc. So did shares of Geokang Technologies Co Ltd, which makes intelligent monitoring terminals.
Cement maker Xizang Tianlu Co Ltd and Tibet GaoZheng Explosive Co, producer of civil explosive materials, both jumped their maximum by 10pc.
Broader impact
The Chinese premier described the dam as a “project of the century” and said special emphasis “must be placed on ecological conservation to prevent environmental damage,” Xinhua said on Saturday.
Government bond yields rose across the board on Monday, with the most-traded 30-year treasury futures CTLU5 falling to five-week lows, as investors interpreted the news as part of China’s economic stimulus.
The project, overseen by the newly formed state-owned China Yajiang Group, marks a major boost in public investment to help bolster economic growth as current drivers show signs of faltering.
“Assuming 10 years of construction, the investment/GDP boost could reach 120 billion yuan ($16.7 billion) for a single year,” said Citi in a note. “The actual economic benefits could go beyond that.”
China has not given an estimate on the number of jobs the project could create.
The Three Gorges, which took almost two decades to complete, generated nearly a million jobs, state media reported, though it displaced at least a similar number of people.
Authorities have not indicated how many people would be displaced by the Yarlung Zangbo project.
The Yarlung Zangbo becomes the Brahmaputra River as it leaves Tibet and flows south into India and finally into Bangladesh. NGOs claim that the dam will irreversibly harm the Tibetan Plateau and hit millions of people downstream.
The chief minister of Arunachal Pradesh, Pema Khandu, said earlier this year that such a colossal dam barely 50km from the border could dry out 80pc of the river passing through the Indian state while potentially inundating downstream areas in Arunachal and neighbouring Assam state.
Some experts also express concerns for a project in a seismically active zone.