Ministry of Ecology and Environment (MEE) and China Development Bank (CDB) have signed a memorandum of understanding (MoU) on January 6, to continue supporting ecological and environmental protection projects in the country in the next five years, as reported by Sina on the next day. Since 2001, CDB has issued a cumulative of RMB2.51tr in loans for sustainable projects, with an outstanding loan of over RMB1.61tr by the end of 2020. According to CDB, it will keep developing its green finance business and providing funding for key environmental protection projects in the country, with the aim to introduce the concept of green credit to all its financial products in the future.

According to a report released by China’s Central University of Finance and Economics and United Nations Environment Programme (UNEP), China required an estimated RMB3tr to RMB4tr in green investments each year from 2015 to 2020, with at least 85% expected to come from social capital. In 2019 alone, the country faced a shortage of around RMB618bn in green investments, citing a research report, with the number still growing. Accordingly, the Chinese government has attached importance to the development of its green finance sector, in order to attract and mobilize more green investments. PBoC has included green finance development as one of ten major tasks for the whole year of 2021, aiming to introduce more green finance-related tax and incentive policies, push forward the construction of the national carbon market, develop a green finance standard system, and pursue greater environmental information disclosure.

China is an important market for green finance market globally. Between 2016 and 2019, the issue of green bonds in the country was worth a cumulative USD120bn, with green transportation and green energy as the two largest sectors, accounting for around 17% and 16% of the total investments, respectively. As of June 2020, the outstanding green loans issued by Chinese banks surpassed RMB11tr, ranking the first globally, with a non-performing loan (NPL) ratio of 0.73%, 1.37 percentage points lower than the average credit NPL ratio in the country. By the end of 2019, the number of environment-themed and corporate governance mutual funds hit 71 in total, with a combined size of RMB139.5bn. However, according to market analysts, China still needs to overcome several challenges to improve its green finance sector, including diversifying its green finance products, establishing a unified green finance standard across the country, and clarifying regulatory requirements.

Sources:

https://finance.sina.com.cn/china/gncj/2021-01-07/doc-iiznctkf0577077.shtml

https://www.yicai.com/news/5372504.html

https://www.yicai.com/news/100715065.html

http://www.p5w.net/roll/finance/202101/t20210107_2501766.htm

https://www.climatepolicyinitiative.org/wp-content/uploads/2020/06/The-State-and-Effectiveness-of-the-Green-Bond-Market-in-China-Mandarin-Version.pdf

http://finance.eastmoney.com/a/202010221672963652.html

http://www.nbd.com.cn/articles/2020-09-19/1508623.html