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Tuesday, 12 March, 2002, 12:59 GMT
Giant China dam seeks funds
Three Gorges dam
Over a million people must make way for the dam
China's controversial Three Gorges dam project may seek to raise money by selling shares in London, the Financial Times has reported.

The damming of the Yangtze River at the scenic Three Gorges is one of the most expensive engineering projects the world has seen.

The project, which is officially estimated to cost at least $24bn (17bn), has been dogged by rumours of funding shortfalls from the outset.

Unofficial estimates say the project could cost at least three times this amount, due in part to problems of corruption and embezzlement.

'Prestige not profit'

But stock brokers think the Chinese government may face a hard sell.

Yangtze river with pagoda
Critics say the project will harm the environment

The project's costs mean that "no way could it be a commercial enterprise because no company could ever pay for the compensation for moving a million people," Howard Gorges of South China brokerage told the BBC's World Business Report.

"Frankly it's a state prestige project, so money is not the key thing."

Click here to see a map of the area

Other power firms in China are tapping the market for funds and would be reluctant to buy shares in such a hefty rival, he added.

China plans to resolve the dam's funding problems by offering shares in China Three Gorges Power Co, the project's holding company, on the domestic stock market and in Hong Kong, the FT reported.

Talks to parcel out shares

Listing CTGP on Shanghai's A-share index could raise 5bn yuan (426m; $600m), according to Li Yongan, deputy manager of the project's overseer, Yantgze River Three Gorges Project Development.

Yangtze flood
China hopes the dam will stop devastating floods

Talks are underway to sell stakes in CTGP to US energy firm Mirant, and Hong-Kong based CLP China Power, Mr Li said.

Three Gorges Power may also seek a listing in London, the FT added.

Chinese firms have steered away from listing on international markets over the last year, waiting for a stronger global economy to bring better market conditions.

Looking to London?

But in recent months rumours of big power and bank listings have started to circulate again, and Chinese regulators have said they wish to do more flotations in London.

London Stock Exchange chairman Don Cruickshank reportedly flew to China earlier this year to promote London listings for Chinese firms.

Last year, a British business delegation was told by Laura Cha, vice-chairman of China's stock market regulator, that London was being considered for more flotations of Chinese companies.

So far, six Chinese firms have listed in London but none of them have a primary listing there.

Impact concerns

The Three Gorges dam will be the largest hydro-electric scheme in the world, measuring 185 metres high, when work on the project is completed in 2009.

The dam is designed to generate electricity and reduce the risk of catastrophic flooding which has plagued the region for centuries.

But environmentalists have condemned the project for the devastating impact it is predicted to have on China's wildlife, eco-system and people.

The World Bank has also refused to support the project.

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Howard Gorges, South China brokerage
"It could never make a good profit but dressed up the right way it could make a reasonable return for shareholders."
See also:

16 Jun 00 | Asia-Pacific
Chinese villagers dig up tombs
21 Jan 00 | Asia-Pacific
China uncovers corruption rackets
23 Mar 99 | Asia-Pacific
Chinese dams damned
16 Mar 99 | Asia-Pacific
China dam faces cash flow crisis
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