China Approves $15 Billion of Green Debt in Pollution Fight

  • Some 55 billion yuan ($8.4 billion) issued January through May
  • First green bond in world’s No. 2 economy issued in January

China approved more than 100 billion yuan ($15.2 billion) of green bond issuance in the first five months of this year, as the world’s largest energy consumer bolsters financing for clean energy to help tackle pollution.

Some 55 billion yuan of the securities, which raise money for projects from renewable energy power plants to electric cars, were issued this year through May, People’s Bank of China research bureau chief economist Ma Jun said at a summit in Beijing Tuesday. China’s clout in the green bond market has expanded rapidly since its first such security onshore in January. The nation already accounts for one third of the total $25.3 billion issuance of the debt globally this year, according to data compiled by Bloomberg.

President Xi Jinping has vowed to cut pollution and shift the economy toward greater focus on consumption and services rather than traditional smokestack industries. Shanghai Pudong Development Bank Co. in January raised 20 billion yuan in the first green bond in China’s interbank market. In April, the Shenzhen Stock Exchange joined its larger peer in Shanghai in a trial of such securities.

“Since the start of 2016, China’s green bond market has been taking bigger global market share,” Judy Li, green finance leader for Greater China at climate change and sustainability services at Ernst & Young, said in a conference in Beijing last week. “A lot more banks and corporates have obtained green certificates and are now waiting for the best window to issue bonds.”

Overseas Expansion

The regions of Chongqing and Inner Mongolia have set up green industry funds, according to Ma.

Although domestic green bonds just officially started this year, more than 600 billion yuan of note sales could have been labeled as such in 2015 had the system been in place then, according to Wang Yao, director for Research Center for Climate and Energy Finance at Central University of Finance & Economics in Beijing.

Chinese issuers are hoping to issue green notes not just to domestic investors, but also to international ones that have the mandate to buy such securities, said Ernst & Young’s Li.

Some issuers have already issued the debentures in the international market. Zhejiang Geely Holding Group Co., owner of the company that makes London’s iconic black cabs, sold $400 million of green bonds in the offshore market last month. Agricultural Bank of China Ltd. also issued 600 million yuan of such notes in the overseas market in October.

Many green projects in China have relied a lot on government subsidies, said Wang at Central University of Finance & Economics. “We need more investors in the green finance sector and we need to use public funds more efficiently,” she said.

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