Three Gorges Probe

Criticism, financial uncertainty surround China’s Three Gorges dam

Asian Assets Direct
May 23, 2006
Washington – A controversial Chinese dam that has received billions of dollars in financing from U.S., European and Japanese banks and export credit agencies is being bombarded with fresh criticism in a country where government projects are seldom questioned. Financial backers of the Three Gorges Dam project have included Bank of America, Barclays Capital, Chase Manhattan, Credit Suisse First Boston, Deutsche Bank of London, HSBC Markets, Merrill Lynch, Morgan Stanley Dean Witter and Salomon Smith Barney/Citigroup. In a rare sign of defiance, 53 senior Chinese engineers and academics recently warned the government that the dam – the worlds largest hydro-power construction project – is beset with technical and financial problems. Their protest follows revelations by the government-controlled media of corruption and shoddy work and warnings from outside experts that the dam will end up operating at a financial loss. “This is a further nail in a coffin that’s already being buried,” said Simon Billenness, a senior analyst at Boston’s Trillium Asset Management who has led investor opposition to U.S. participation in the dam. Because the project is so risky, Three Gorges “can only tap capital markets through intermediaries and even that route’s getting more difficult,” Billenness said. Reports of corruption, human rights violations and environmental risks associated with the dam have fueled the efforts of “socially responsible” investors such as Trillium and the Domini group of funds to dissuade underwriters from having anything to do with the project. The World Bank and U.S. Export-Import Bank walked away from the project years ago amid warnings from Chinese and international experts that the dam, designed to help control floods while generating electricity, carried serious environmental, social and human-rights risks.

Categories: Three Gorges Probe

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