China National Water Resources and Hydropower Engineering Corporation (CWHEC) will build the main concrete dam for the Tekeze Hydro-Power Project (THPP).
The dam, which at 185 metres is 10 metres higher than China's controversial Three Gorges Dam, and installation of a 300 megawatt power plant is expected to take five years to complete.
CWHEC was awarded the contract in June, beating bidders from Germany, Italy and Japan, to build the dam for the Ethiopian Electric Power Corporation
The company works on almost 80% of China's water projects and is a major contractor on the Three Gorges Dam.
Water management
The country has abundant water resources but the agriculture sector, the country's most important industry, suffers frequent droughts.
The Tekeze dam will help irrigate large tracts of northern Ethiopia.
Coffee is the main crop and contributes about 10% to the gross domestic product and employs about 15 million people, or 25% of the population.
The Tekeze River is a tributary of the Nile, running through the northern Tigray region and then into Eritrea.
Chinese Construction Minister Wang Guangtao, Chinese Ambassador to Ethiopia Ai Ping and senior Ethiopian government officials attended the ground breaking ceremony.
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