Three Gorges Probe

The international expansion of Chinese dam builders

(January 13, 2010) Historically, Western countries have provided the technology for the bulk of China’s hydropower dams. The first turbines to be installed on a river in China was under the Qing Dynasty in 1909, by German company Siemens. But when the Chinese government decided to build the giant Three Gorges and Ertan dams in the early 1990s, it decided to do things differently.

Western equipment suppliers were still needed, yet this time, the rules were that the leading hydropower companies of the time, including ABB, Alstom, General Electric and Siemens, had to manufacture half of the turbines and generators on Chinese soil in co-operation with Chinese partners. As in the case of other manufacturing sector players entering joint ventures with Chinese suppliers, technology and knowledge of dam building were transferred in the process. From that point on, China became one of the biggest players in the international dam market in the 21st century.

Chinese firms are now building 19 of the 24 largest hydropower plants currently under construction worldwide. Roughly half of all the world’s large dams are within China’s borders. With a capacity of more than 170,000 megawatts, China is now the world’s largest producer of hydropower. Chinese manufacturers had been involved in small dam building in countries such as Burma and Nepal for several decades but it was only in 2003 that they entered the exclusive market for large hydropower projects. Three companies which had picked up the latest technology in the Three Gorges and Ertan projects and soon managed to underprice and outpace their Western competitors were Dongfang Electrical Machinery, Harbin Power Equipment and Sinohydro, China’s leading Beijing-based hydropower contractor. Adapting Western technology to poor-country needs, China’s hydropower companies have ventured into foreign markets en masse.

The discussion on conflicts over large dams and the socio-environmental implications of poorly managed developments in unstable, developing countries is not new, but how China came to dominate the global market in dam building and at what price are questions that anyone with an interest in the future of hydroelectric power would be interested in knowing the answers to. These key questions are examined in Peter Bosshard’s long essay ‘China Dams the World’, in the latest issue of the World Policy Journal. Bosshard, the Policy Director of International Rivers, has been monitoring the global dam industry for almost 20 years. His eyewitness accounts of resettlement sites of communities affected by dams, and his involvement in key policy processes and project campaigns which have shaped the sector, make him an important commentator on the social and environmental standards of governments, financial institutions, and the dam industry. He has been promoting corporate social responsibility since the early 1990s and in particular working towards strengthening the social and environmental standards of China’s overseas investors. The Export-Import Bank of China (also known as China Exim Bank) is a key source of finance for large overseas dam construction and is the key tool through which the Chinese government supports the global expansion of its infrastructure companies. Created 60 years after its Western competitors, its portfolio has outgrown all other export credit agencies, including the World Bank.

Controversial projects range from the Merowe Dam in Northern Sudan and the Gibe 4 Dam on the Omo River in Ethiopia, to the well documented Three Gorges Dam on the Yangzte River and the myriad number of major hydropower projects in Myanmar. In places like Myanmar, the government does not require environmental impact assessments for large dams, many of which are located in the remote territories of ethnic minorities.

But, as Bosshard points out, China is not the only country to push the global boundaries of hydropower development. Indian companies are building dams in Nepal, Bhutan, Myanmar, and Vietnam. Thai, Malaysian, and Vietnamese companies have proposed building dams throughout the Mekong Basin. Russian, Iranian, and Korean suppliers are also not far behind. Many do not follow accepted international social and environmental standards in their projects, but, as Bosshard argues, China’s disproportionately large stake means that it must take a fair share of the blame.

While officials in Beijing strengthen China’s own environmental regulations to clean up the mess in its own backyard, a great disconnect appears still to be happening with its investment elsewhere. This is not necessarily due to a lack of guidelines to improve the environmental performance and community relations in Chinese overseas projects. Government agencies have been issuing a series of recommendations since 2006, and ministries are currently preparing guidelines that will require investors to apply Chinese domestic environmental laws to overseas projects if host country standards are too weak. Yet distance poses a serious challenge to any form of implementation.

In his essay, Bosshard eloquently shows how ‘dams have become the highly visible symbols of burgeoning economic cooperation between China and the developing world – at a time when Western governments are going soft on risky infrastructure projects’. Chinese investors and companies are moving in and rapidly expanding the industry to places where Western governments no longer dare tread. Yet in an age where knowledge transfer is almost instantaneous thanks to the prevalence of the World Wide Web, the potential socio-environmental implications of large-scale infrastructure projects no longer go unheard. As Bosshard points out, civil society groups in China and in host countries have begun to act as a check on the role of these companies. They are becoming more adept at monitoring the role of foreign investors. The backlash against Chinese investors that we have seen in recent years, and the Chinese government’s move towards sustainability standards for overseas investments, are perhaps positive signs of what is to come. Bosshard further concludes that Western dam builders should not hide behind the lower social and environmental standards of their Chinese counterparts, but should instead work together with Beijing and host country governments to strengthen standards in global projects.

Jacqui Dixon, CSR Adia, January 13, 2010

Categories: Three Gorges Probe

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