China’s Ministry of Water Resources (MWR) plans to set up an overseas investment fund to finance the country’s cash-strapped medium and small hydro power projects. MWR is expected to authorise the Bank of China to launch and manage the investment fund, while MWR will recommend projects and other information and services for the fund.

Bank of China International Holdings, the Bank’s investment arm in London, together with Hong Kong-based First Eastern Investment Group, are making preparations for the initial offering of the fund.

Targeting global strategic investors with an interest in hydro power projects, the planned fund is said to have met with interest from international conglomerates and transnational corporations.

This move is expected to boost the construction of Chinese hydro power projects. Of the country’s estimated useable capacity of 378GW, one-quarter is medium and small plants, with an installed capacity of less than 250,000kW, located in mountainous and rural areas.

China plans to increase the installed capacity of hydroelectric stations in rural areas by 10GW during the Ninth Five-Year Plan (1996-2000), as well as achieving electrification in 300 counties.

MWR is expected to recommend the construction of 52 hydro power and water supply projects. With a total installed capacity of 3GW and a daily water supply capacity of 9.5M tons, these projects are expected to cost about US$3.5B.