Funding and Lending Problems with China’s Three Gorges Dam Project

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Funding and Lending Problems with China’s Three Gorges Dam Project

The Three Gorges Project continues to leave a wake of environmental and social transgressions. An assortment of activists and over 45 international groups, including the International Rivers Network and Sierra Club, have fought the project and all its detrimental attributes (Lammers 1). But because of the predetermination of its construction, certain consequences associated with the Three Gorges Dam are inevitable, especially those resulting from the inundation zones.

Oppositely, there remain a variety of consequences, specifically concerning the impact of relocation and resettlement, which could be minimized and even avoided if the necessary steps were taken. Unfortunately, the current mixture of economics and politics between the State Development Bank of China and its lenders provides no safe guards against such transgression. Despite protests few if any changes have been made to rectify them. In the following passage, I will give a short background of the dam’s history and consequences, disclose China’s current resettlement efforts, and explain why little change has been made to correct these matters. In the end, I will provide an alternative solution and hopefully focus needed attention to the most influential aspect of the Three Gorges Project: funding and lending. The Three Gorges Dam and Reservoir is questionably the largest engineering feat and construction project ever undertaken. The project originated as a solution to China’s long-standing problems with mainland flood control (Shen 1).

Soon after, the plans were altered to incorporated a giant shipping lane to the reservoir and 26 hydroelectric generators to the dam (Sly 1). The project, which resides on China’s Yangtze river, has entered the second phase of completion. Following the diversion of normal river flow and traffic to a side channel, major construction of the coffer dam, which will reportedly span more than a mile in width, has ensued (Sklar 4). And major is no exaggeration considering the Chinese government is attempting to dam the world’s second largest river. The Three Gorges dam is estimated to be over 600 feet high and result in a reservoir of over 400 miles in length (Lammers 1). The resources and materials to be consumed, beyond the 29 billion dollar cost estimate, are to include: the "3.6 billion cubic feet of rock and soil... to be excavated, 1 billion cubic feet of embankment fill... moved, 900 million cubic feet of plain and reinforced concrete... to be poured, and nearly 300,000 tons of metal structures.

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"Funding and Lending Problems with China’s Three Gorges Dam Project." 22 Jun 2018
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.. to be installed" (Mufson 2). The project is estimated to produce 18,200 megawatts of electricity and account for around 10 percent of national energy production (Lammers 1). But the magnitude of Three Gorges project encompasses far more than the ecological reverberations of damming a river. Its wake of consequences will also result in the damning of over 1.9 million people: economically, culturally, and socially (Zich 3). Upon completion, the Yangtze Reservoir will claim vast economic resources. Flooding will not be isolated to the steep embankments where livestock graze, it will also claim as much as 240,000 acres of farmland (Zich 17). President Zhang Zemin remarked, "It's a pity that so much fertile land must be lost" (Zich 17). Yet still undaunted the intended reservoir will also engulf three of China's most prized cultural icons and elaborate ecological wonders: the Three Gorges (Zich 6). Carved by eons of erosion on the Yangtze, an intricate lineage of three mammoth gorges were produced. Sadly, the "Three Gorges" will be little more than the namesake of the dam, following completion of the reservoir. The Yangtze River which connects the Three Gorges, running East from Chongqing to the seaport city of Shanghai, houses dozens of Westernized towns, hundreds of pre-industrial villages, and numerous cultural relics: including both Buddhist and Taoist temples as well as ancient Paleolithic sites (Weichao 9). Upon the completion of the dam, an estimated "...8,000 unexcavated sites will be lost forever in a tomb of water and sediment" (Zich 17). But these cultural resources are not merely scheduled for submersion, adding insult to injury they are presently being plundered. The extensive construction operation in the Three Gorges valley created enormous excavation sites, in which numerous tombs and artifacts have been uncovered. But due to the impending floods within those inundation zones, very little care has been taken to retain and preserve these cultural antiquities. Although the government's negligence has been heavily scrutinized and outside assistance provided, several archeological sites remain to see adequate protection and continue to be exploited. Without proper documentation and cataloging, pieces have been showing up on black markets around the world. Looting reached an all time high when a Han Dynasty candelabra was sold in New York for 2.5 million dollars. Archeologists are now racing against time to secure dig sites and tombs that "...are critical in reconstructing the little understood picture of South China's contribution to Chinese civilization" (Childs 1). Unfortunately, most of these are unavoidable consequences. Raising the current watermark by 577 feet will inevitably erase the fertile land, the archeological sites, and cultural treasures (Mufson 2). With this preclusion drawn only the dam’s social ramifications remain undecided. One cannot ignore the immediate and long-term implications of 1.2 million people being uprooted from their lives (Shen 1). The finished reservoir will erase all visible attributes of 1,400 cities (Zich 3). All occupants of those cities will be forcibly relocated before the inundation date of 2009. China’s present resettlement program for these people consists of vague description and ambiguous wording, calling for "…a new home, new livelihood, and compensation for their losses" (Ming 1). Adding to the confusion are indeterminate resettlement classifications, which make an accurate census of resettlers nearly impossible. The Chinese government separates status as follows: "productively resettled, meaning that they had either new farmland or new factory jobs…residentially resettled, meaning a place had been found for them to re-establish their homes…and…account-closed resettlers, meaning they had received their share of the compensation and moving expenses and the authorities had no further responsibilities towards them" (Ming 2). Yet, it is not evident which classifications are included in the official reports of relocation.

Zhang Zemin, China’s Prime Minister, was quoted as saying, "A successful resettlement of the people affected by the Three Gorges Dam project is the key to the progress and eventual success of the project" (qtd. Mufson). But despite the wishful sentiment, Wu Ming, a reporting Chinese sociologist, stated that the resettlement "…has been plagued by mismanagement, official corruption, inadequate compensation, and a shortage of farmland and lack of jobs for the resettlers" (Ming 1). In January, the Hubei Province claimed that 200,000 people were then resettled, indicating that the program was actually ahead of schedule (Ming 1). The report was quickly scrutinized, as skeptics believed that the "figure was an exaggeration by local officials wishing to impress their superiors" (Ming 1). Later, an official report from the Three Gorges Project Resettlement Bureau rebuked the original figure and reported that only 100,000 people had been resettled (Woodman 1). These variations and falsified figures make it extremely difficult to assess the progress of the resettlement program. Some critics believe that only 50,000 people have been relocated in the first 5 years of the program, leaving over half a million to be moved by 2003, and the remainder by 2009 (Eckholm 2) . Nevertheless, problems with the current program have already surfaced. The entire plan stems from the single compensation method that atoned for the consequences of similar reservoirs and hydrological projects in the mid-1980s. The program reimbursed resettlers for property with the "single distribution of cash" (Daiwo 2). However, in the case of the Three Gorges Dam, efforts have also been made to compensate farmers with a proportionate amount of land, place workers in appropriate jobs, or retrain workers with appropriate job skills for the area. But these goals are not without their pitfalls. First, the education level for this area is extremely low with an illiterate population of 31.9%, making job training much more difficult and costly (Daiwo 3). Also, the resettlement locations often place citizens in densely populated cities where jobs are already scarce. Qu Jiayun’s family now faces this obstacle. The family, who lived on Zhongbao Island growing melons for three generations, was moved during the second phase of the dam. After being relocated, Qu had to take "a low-paying menial job in a bank", later quitting to sell fruit on the streets (Mufson 2). Second, the amount of arable and fertile land is not nearly great enough to replace what farmers are losing. The Gongying family is one of many falling victim to this trend. Their family originally lived just above the new dam site, making about $1200 a year harvesting a small plot of orange trees. They were paid a lump sum of $2,400 and were relocated to land only two-thirds the size of their previous residence. Moreover, they spent most of the lump sum on a new house, and their new plot was more suited to vegetables than orange trees. The result was a crop that failed this year, forcing the husband to take temporary work at a fertilizer factory. The family’s income then dropped to $240 for the year (Mufson 2). Beijing has acknowledged the general ineffectiveness of previous resettlement programs, where "many people were left stranded without employment or adequate shelter and in a state of destitution, creating considerable social and political instability in reservoir areas," said Li Boning a leading government expert on resettlement (Tyson 2). And globally, "the experience of more than 50 years of large dam building show that the displaced are generally worse off after resettlement, and more often than not they are left economically, culturally and emotionally devastated" (Woodman 2). So why does the situation persist? Moreover, how can the trend be prevented from continuing, not only in the case of China, but in similar scenarios such as the Narmada damming project in India or the shipping lanes proposed for Paraguay, Brazil? Eminent Chinese professor, Huang Wanli warned that, "People who have devoted so much work to the [Three Gorges] Project and have spent money will try anything to defend their project" (Shen 2). His statement implies that once an operation such as the Three Gorges Project has been condoned with monetary support from the financial community, it becomes nearly impossible to dissuade its supporters. For example, sanctions and embargoes have had little success in motivating the Chinese to change their methodology. However, certain institutions like "World Bank, the U.S. Export-Import Bank, and other quasi-governmental lenders are stepping back from the most criticized projects" (Pascal 2). This is primarily the result of organizations such as Human Rights Watch/Asia, that are issuing warnings similar to this, "…foreign investors should avoid any involvement with the Three Gorges Dam project…until the Chinese government can provide verifiable guarantees that the rights of…the people scheduled to be relocated will be protected" (HRW 1).

There is an important distinction to be made at this point. Although these efforts do decrease the number of willing lenders to the Chinese, the attempts to rectify actual transgression are negligible and have little influence over Chinese policy. Meanwhile, the growing international discontent with the issues of environmental and human rights only aggravates our impotence as a global community. Finally, reproach for the Three Gorges Dam and Reservoir spread to the financial institutions currently backing the project.

When facing this criticism, Jan Stromblad, senior vice president of environmental affairs for Swedish-Swiss engineering giant Asea Brown Bover AG, replied, "We want clear rules, and if we stick to them, we don’t want to be criticized" (Pascal 2). And though Mr. Stromblad’s comment is more than likely a scapegoat, it does contain a revolutionary notion. Banks and lending institutions should be provided specific guidelines, concerning environmental integrity and human rights security in the projects they endorse. Although such institutions maintain no rights of moral authority over country, company, or individual, they do have monetary authority over them (Pascal 2). Thus, the same guidelines enforced on the banks could then be incorporated into contracts and superimposed upon any attribute of the construction operation. To avoid future outbreaks of misappropriated funding, misguided support, and inappropriate construction, the global community must act now to form an international regulatory committee which will establish and enforce these environmental and human rights standards for the lending industry. Currently, an effort has been made by World Bank co-sponsored by World Conservation Union to form a special dam commission; however, this commission should not be limited to the narrow topic of damming projects alone (Pascal 1). To achieve the desired egalitarian outcome, the committee should regulate all large infrastructure projects that have any reverberations towards environmental or human rights affairs. The first step is the continued push by the international community for global protection of natural and human resources. The momentum will further stimulate the formation of the industry commission. Dam opponents and critics "deserve enormous credit" for exposing poor damming projects "when no one else would listen", says John Briscoe, senior representative of World Bank (qtd. Pascal 2). The "test case" is obviously "dams" (Pascal 1). Therefore, efforts must be focused accordingly to expose the dangers of unregulated lending practices, citing specific consequences of projects like the Three Gorges.

Completion of the Three Gorges Dam is now (and has forever been) a forgone conclusion in the eyes of the Chinese government; it is now time for officials, activists, proponents, and opponents alike to re-evaluate their efforts. Although the protests and efforts of activists have not been successful in curbing the casualties of the Three Gorges, they have emphasized the solution. Resolution of these injustices lies not in the sanctioning of negligent infrastructure projects once their consequences are in effect, but rather in their prevention with a uniform set of standards that will guide and govern funding from conception through implementation. If you believe that the current system lacks efficient recourse for resolving transgressions against environment and humanity, then I urge to get involved. First, familiarize yourself with the issues. I then encourage you to become an active participant. Organization such as Sierra Club or the International Rivers Network furnish members with on sight reports, project updates, and research resources. Joining one of these organizations will also provide you the opportunity to contribute to the awareness and importance of lending regulations and the World Dam Commission.


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Mufson, Steven. "The Yangtze Dam: Feat or Folly." Washington Post. 9 Nov. 1997. ASU [Microfilm]: A1.
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Shen, Doris. "Three Gorges Dam not the Answer to China’s Floods." International Rivers Network. Press Release. < HYPERLINK "" >.
Sklar, Leonard S. and Amy L. Luers. "Report on a Site Visit to the Three Gorges Dam, Yangtze River, Hubei Province, China." International Rivers Network. < HYPERLINK "" >.
Sly, Liz. "Yangtze River Blockage a Big Splash in China." Chicago Tribune. 9 Nov. 1997, ASU [Microfilm], sec. 1: 26. Tyson, James L. "Uphill Battle: Ardent Foe Takes On China Dam." Christian Science Monitor. 12 Nov. 1997, ASU [Microfilm]: 1.
Yu Weichao. "The Four Mysteries of the Three Gorges to be Unveiled." Wanxian Daily. International River Network. Press Release. < HYPERLINK "" >. (6 Jan. 1998).
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Zich, Arthur. "China’s Three Gorges: Before the Flood." National Geographic. Sept. 1997: 2-33.

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