China's policymakers are locked in a fight with the deflation monster, and any path to economic recovery hinges on cutting excess supply and production capacity, while reviving the ailing property sector. Tariff tensions with the U.S. have further clouded the outlook this year, adding urgency to the need for targeted stimulus. Also, authorities may ramp up fiscal support, and one of the boldest ways to do that was recently launched in the country's most ambitious infrastructure project since the Three Gorges Dam.

According to the state-run media outlet Xinhua News Agency, Chinese Premier Li Qiang launched construction of the world's largest dam project, with a total planned investment of 1.2 trillion yuan ($167 billion). 

Li described the multi-decade Yarlung Zangbo River dam as a "project of the century" and said special focus "must be placed on ecological conservation to prevent environmental damage." 

On Wednesday, Guo Jiakun, China's Foreign Ministry spokesperson, told reporters, "To build the hydropower project in the lower reaches of the Yarlung Tsangpo River is fully within China's sovereignty," adding, "China acts with a high sense of responsibility in harnessing cross-border rivers, and has rich experience in hydropower projects. The planning, design and construction of this newly announced project strictly follows the highest national industrial standards." 

The dam will comprise five cascade hydropower stations and is expected to begin operating in the early 2030s.

Once its generators come online, the project will dwarf the electrical output and scale of China's Three Gorges Dam.

Via Goldman 

Timeline comparison of the Yarlung Zangbo Project vs. Three Gorges Project

In a separate note, UBS analyst Sunny Zhang highlights major sector and stock-specific beneficiaries of this new mega project. 

"We detailed the sector-specific implications of the Yarlung Zangbo Dam project, highlighting key opportunities and expected impacts across Heavy Duty Trucks, Materials, Infrastructure, and Power equipment," the analyst noted, adding, "The key stock beneficiaries are Weichai Power, SInotruk, CNBM, Tibet Tianlu, NARI, CCCC, China Railway Group." 

Highlights of the note:

Another note from the bank, featuring analyst Ryoya Wakamatsu, noted: 

"While the trade truce is a plus for markets, it is also true that market participants are becoming immune to trade headlines. Sentiment is good at the moment with anti-involution focused over the last month. This week the buzz word has been the mega hydro power project on the Yarlung Zangbo River. This is a 10-year 1.2tn Yuan project to build the world's largest dam." 

Beijing is once again turning to its playbook of infrastructure-led stimulus to combat deflation and shore up its domestic economy. Let's see how that works out...