China has officially begun construction on a massive hydropower dam along the lower reaches of the Yarlung Tsangpo River in Southern Tibet. With an estimated investment of 1.2 trillion yuan ( US$168 billion ) and a planned annual capacity of 300 billion kilowatt-hours ( kWh ), it will be the largest hydroelectric project in the world, bolstering China’s green energy supply and spurring a new wave of infrastructure growth in the country’s southwestern region. 

The plan was first unveiled in 2020 as part of China’s national development strategy and was approved in late 2024. The construction period is estimated to last for a decade, and upon completion, it will surpass the Three Gorges Dam in the Yangtze River, currently the country's largest hydropower project, by five times in terms of total investment and three times in capacity.

The Yarlung Tsangpo River has a drop of over 5,400 metres, the largest vertical descent of any river globally, providing a superb advantage in hydropower generation. The dam is designed to have five-cascade hydropower stations along a section of the river that drops 2,000 metres in a span of 50 kilometres.  

According to the blueprint, the mega dam will generate 300 billion kWh of hydropower per year, enough to electrify for the electricity use of about 300 million people. The majority of the electricity produced will be transmitted through the grid for use by other provinces, generating an estimated annual revenue of 20 billion yuan for Tibet.

Although China remains heavily reliant on fossil fuels, the share of low-carbon electricity has steadily climbed, reaching 38% of total generation in 2024. Hydropower is the country’s largest source of clean electricity, accounting for 13% of the total generation in 2024. The construction of the Yarlung Tsangpo Dam will play a pivotal role in China’s energy transition, providing long-term benefits that align with its carbon neutrality goals.

In the short term, the project will also support China’s economic growth. Citi analysts predict the project could add 0.1 percentage point to China’s GDP this year, and its impact will continue to be felt throughout the construction period.

The start of construction on the mega dam has fuelled a surge in infrastructure- and construction-themed stocks in China’s A-share market, with related ETFs rising over 10% in a day.