China’s Three Gorges Dam Project

The Three Gorges Dam is a hydroelectric dam that spans the Yangtze River in China.  The Three Gorges Dam is the world’s largest power station in terms of installed capacity  (22,500 MW).

A large dam across the Yangtze River was originally envisioned by Sun Yat-sen in The International Development of China, in 1919. 

In the mid 1980s the idea emerged again and construction started on December 14, 1994.

The dam was expected to be fully operational in 2009, but additional projects, such as the underground power plant with six additional generators, delayed full operation until May 2012. 

It was, therefore, with great interest that recently we read the report of the National Audit Office of the People’s Republic of China on the draft financial final accounts for the fulfilment of the Three Gorges Project.

The report noted:

Based on the determined construction content and using the price levels at the end of May 1993 as a benchmark, the Three Gorges Project Construction Committee approved a total static investment budget estimate of 135.266 billion yuan (approximately $USD21 billion in current exchange rates) for the Three Gorges Project, in which 50.09 billion yuan for the dam project, 32.274 billion yuan for the power transmission project, and 52.902 billion yuan for resettlement funds. Affected by such factors as price and interest rate calculations, the dynamic total investment totaled 248.537 billion yuan (approximately $USD 40 billion), of which 126.385 billion yuan for the dam project, 36.499 billion yuan for the power transmission project, and 85.653 billion yuan of resettlement funds.

We started to be a little suspicious that this audit report may have been a cheerleading exercise when we read:

Since 1992, under the correct leadership of the CPC Central Committee and the State Council, and strong support from people throughout the nation, and under the direct leadership of the Three Gorges Project Construction Committee, the project’s corporation and relevant local governments meticulously organized and successfully accomplished the Three Gorges Project construction tasks.

But to stop at that juncture in the report would be to do the audit a disservice.

The report later continued:

  • In construction of the dam project, the relevant units failed to strictly implement contract stipulated compensation for material price spreads and labor costs, payment of tender agent fees, supervision fees and maintenance fees all beyond standards, at the same time with some parts and construction equipment remaining idle for a long time, resulting in an increase of investment by 695 million yuan
  • In construction of the power transmission project, due to the low design standard, assets remained idle for long periods, increasing investment by 113 million yuan.
  • Resettlement funds were misappropriated, etc., involving 279 million yuan, mainly used for non-relocation projects, offsetting administrative expenses, etc.
  • The design, construction, supervision and contract management of some medium and small projects were not up to standard, involving 4.13 billion yuan
  • Compilation of resettlement fund final accounts and accounting handling of some resettlement management agencies and relocation units were irregular.

Finally it notes:

The audit also revealed that leads to 35 cases of alleged violation of law and discipline and economic crimes, involving 113 million yuan; in accordance with the law, have been transferred to relevant departments for investigation and tackling. As of the end of November 2012, 11 persons have been held accountable.

A project of this enormous magnitude cannot expect to be delivered without challenges and this report – scant in details on occasions and overflowing with praise in others – is, nonetheless, a valuable addition to the lessons to be learnt from the development of major projects.

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