The secret dam: China begins huge project in World Heritage Site, displacing up to 100,000 people and devastating unique tribal societies

In the shadow of the Jade Dragon Snow Peak, deep inside the Tiger Leaping Gorge, Chinese developers are operating in secret to push through a massive dam project that will wash away the section of the Yangtze river valley thought to have been the real location for the fictional Shangri-La.

In the shadow of the Jade Dragon Snow Peak, deep inside the Tiger Leaping Gorge, Chinese developers are operating in secret to push through a massive dam project that will wash away the section of the Yangtze river valley thought to have been the real location for the fictional Shangri-La.

Local tribesmen have revealed that work is already under way on a massive project that would flood a Unesco world heritage site, displace more than 100,000 people and destroy the way of life of the unique Naxi people, one of the world's only surviving matriarchal societies. It would also bring an abrupt end to the nascent tourism industry in the remote southwestern Yunnan province.

The battle to save the gorge, one of the deepest in the world, has pitted a David-like alliance of green groups and local tribespeople against the Goliath of the Huaneng Group, China's biggest independent power producer, working with the Yunnan provincial government. The company is run by Li Xiaopeng, son of the hardline former prime minister Li Peng, who oversaw the massacre at Tiananmen Square. Mr Li was at the forefront of the controversial Three Gorges Dam project that was pushed through in the teeth of strident opposition from environmentalists and residents.

"The stakes are extremely high. Chinese environmentalists have decided to make this their next major campaign," says Ma Jun, a consultant who was the first to produce a study on the dam's implications. "I'm optimistic they will succeed because this case is a touch-stone of all the big talks on balancing environmental preservation with development."

Opponents say the reservoir will devastate local cultures, robbing people of their farms and livelihood, and leave tens of thousands of mostly Tibetans, Miao, Yi, Bai, Lisu and Naxi minorities homeless. It would also condemn ancient villages with distinctive architectural styles. Concerns are mounting over the fate of the Naxi with their unusual matriarchal tradition, which has drawn an increasing number of visitors to the area.

The formerly nomadic people thought to have originated in Tibet, passes property to the youngest daughters and forces teenage boys to canvas door-to-door for partners in a system of "walk-in marriages". They are also the last ethnic group to use a form of hieroglyphics, a tradition which is passed down through tribal shaman, known as Dongbas.

Premier Wen Jiabao agreed this year to suspend plans for 13 dams on the Salween river in response to protests from Burma and Thailand and Chinese environmentalists. Construction was supposed to have been delayed while an environmental assessment was undertaken but this was brushed aside by the promise of a power facility capable of generating 30 per cent more electricity than the Three Gorges Dam.

Electricity shortages forced factories on the east coast to close down this summer and economic pressure has seen China's oil imports grow by more than 30 per cent this year. China already has more than 50,000 large and medium-sized dams and is running out of waterways to stem.

Nine NGOs, including Green Earth Volunteers and Friends of Nature, have petitioned Mr Wen hoping to persuade him to save an area recognised by Unesco. "We call on the authorities to fulfil the vision of science-based development ... to balance the human interests against nature, in order to leave our precious world heritage like Tiger Leaping Gorge, the first bend of the Yangtze, to the world and to future generations", the petition said.

Backpackers had long ago discovered the joys of trekking through a gorge which gets its name from the legend of the tiger, said to have leapt across it at the narrowest point where only 100 feet divide the edges.

The province originally hoped to reserve the area around the historic town of Lijiang for tourism, but the state has designs for eight major dams along a 350-mile stretch of the upper Yangtze. Villagers, worried that they would lose their farmland, staged a rally in Lijiang in July to voice their objections. They are being supported by the state forestry bureau, the seismological bureau and the Chinese Academy of Social Sciences.

The dam is being pushed by the Yunnan government as a way of dealing with the consequences of earlier environmental disasters. Water from the reservoir is to be diverted to dilute the heavily polluted lake which supplies the provincial capital of Kunming.

The industrial centre of the province is being strangled by water shortages despite sitting next to one of the largest fresh-water lakes in Asia. Decades of mismanagement have shrunk the lake and the remaining water is too dirty to drink.

Yunnan's forests have all been chopped down in the past 50 years so not only has Dian Chi lake silted up but so have several reservoirs constructed to solve Kunming's water shortage. The danger posed by silt to the Three Gorges Dam has already forced Yunnan to dam the upper reaches of the Yangtze specifically designed to trap soil that would otherwise wash into the Three Gorges reservoir.