South Asian water security comes into focus

What’s happened?

In late December the Chinese central government approved plans to construct the Medog dam on the Yarlung Tsangpo, a river originating in Tibet that flows into India and Bangladesh (where the waterway is known as the Brahmaputra). The Indian and Bangladeshi governments have reportedly already lodged their concerns with China, reflecting their anxieties about that country’s ability to control the flow of water into South Asia.

Why does it matter?

The Medog project, envisaged as the world’s largest hydropower station, has a planned capacity of 60GW. It is not the first Chinese hydroelectric plant on the river; Tibet has long been a focal point for hydropower development. However, the project’s scale is notably more ambitious than previous developments; with a price tag of Rmb1trn (US$136.2bn), it envisages the generation of three times more power than the Three Gorges Dam (currently the world’s largest hydropower station, with 22.5GW of capacity, in China’s Hubei province).

The geographic isolation of Yarlung Tsangpo means that construction will be costly and difficult, however, probably lasting for years. Challenging geography and poor existing infrastructure will complicate the deployment of construction equipment and the resettlement of affected communities. Medog county, in Tibet, is also prone to landslides and earthquakes, which have delayed past construction and will weigh on future timelines.

Even as the central government dedicates more financing support to the Medog dam—through means such as special sovereign bonds, the issuance of which could illustrate the political support behind the project—it is conceivable that the project will take over a decade to materialise. As a result, the Medog dam will not offer immediate solutions to China’s existing power needs, while providing only a limited (and drawn-out) boost to local investment and construction activity.

The power project also has regional geopolitical implications. Chinese hydropower plans on the Yarlung Tsangpo/Brahmaputra have previously stoked anxieties among downriver riparian nations in South Asia, given their concerns over water security. These countries fear that—in a worst-case scenario, precipitated by some geopolitical incident—China would be able to use its control over the flow of the river’s water as a tool of diplomatic leverage. China has denied its willingness to do this, and has instead highlighted its openness to co-operate with downstream countries regarding disaster mitigation and data sharing.

China’s reassurances are unlikely to allay the region’s concerns, given the experience of lower riparian countries in South-east Asia, which have alleged agricultural and environmental damage because of Chinese dams along the Mekong, as well as the chronic unease in India-China relations. A potential reignition of China-India tensions will be a key factor to watch, despite the stabilisation in bilateral ties in October (following an agreement to ease hostilities along their disputed border).

What next?

The long timeframe of the Medog project means that EIU does not expect this event to cause another immediate souring of India-China ties. Even so, we also do not expect India to be ultimately able to deter Chinese construction of the dam, partly as a result of strained bilateral relations. Bangladesh will move cautiously, given its increasingly complicated relationship with India, as well as its interest in maintaining positive ties with China in view of its own economic and external financing needs.

The successful resumption of discussions between China and India on transboundary river issues will be an important indicator of whether the countries can prevent this issue from spiralling into a wider diplomatic incident. (The last talks were held in 2019, before the countries’ military stand-off in eastern Ladakh in 2020.) Failure to do so quickly (if, for example, construction work on the Medog project began before the resuscitation of this dialogue) could yield another threat to the health of the already fragile India-China relationship. Nevertheless, this risk is unlikely to materialise quickly, given the long timelines outlined above.

The analysis and forecasts presented in this article are drawn from EIU’s Country Analysis service. This comprehensive solution offers essential insights into the political and economic outlook of nearly 200 countries, empowering businesses to manage risks and develop effective strategies.