CHINA SUSTAINABLE FINANCE AND GREEN BOND MARKET
China is currently the world’s largest emitter of greenhouse gases, accounting for nearly 1/3 of the global total. The Chinese central government has pledged to be carbon neutral by 2060, with emissions peaking in 2030.
As part of its emissions reduction plan, China is introducing more eco-friendly practices in the financial services sector, but there is a steep learning curve, as loans to high-carbon industries account for a fairly high proportion of financial institutions’ assets in the country. An accelerated withdrawal or delayed exit from high-carbon sectors may result in heightened financial risks.
There is a huge opportunity for sustainable finance in China given the government’s ambitious emission reduction target. China’s green finance market has already reached $2.3 trillion, according to statistics from UBS.
Green Bond Market
According to China International Capital Corporation, China needs RMB140 trillion ($21.3 trillion) of debt financing over the next 40 years to meet its net-zero emissions target. Green bonds are an important part of the picture. China issued the most green bonds globally in 2022 at $76.25 billion. In 2023, China is expected to issue between $90 billion and $100 billion in green bonds.
China’s green finance pilot zones are part of the country’s efforts to build a robust green financial system. The first set of green finance pilot zones were launched in Zhejiang, Jiangxi, Guangdong, Guizhou, and Xinjiang in June 2017. Since then, China has added Lanzhou to the list in December 2019. The key goals for the pilot zones are to enhance the role of green finance in domestic financial institutions, promote green credit / green insurance / green bonds, explore setting up markets for environmental rights, and developing green finance risk control mechanisms. China will continue to promote the construction and development of green financial reforms and innovation pilot zones. Provinces and municipalities such as Beijing, Chengdu, Chongqing, Shenzhen, and Shanghai are actively striving to promote the development of local green finance.
Beijing is committed to building China’s first international green financial center, and the Beijing Environment Exchange is working hard to transform and upgrade from a regional carbon emission trading pilot trading platform to the country’s first green asset trading.
Following the country’s effort to cap use of coal, strategic investment opportunities lie in the green infrastructure and clean energy sectors, including the development of wind and solar power generation, where green finance is expected to play a bigger role in the near future. U.S. financial institutions that provides information disclosure and green certification services, support Chinese green finance projects to participate globally, or have green financing instruments and products, should seize this new growth point of the Chinese financial market.
For further information, please contact office.beijing@trade.gov.