China's green finance achievements offers best-case study for APEC sustainable finance proposal

Editor's notes: Xu Tianqi is the deputy director of Macro Research Department of the Chongyang Institute for Financial Studies at Renmin University of China. The article reflects the authors' opinion and not necessarily the views of CGTN.

The 31st Asia-Pacific Economic Cooperation (APEC) Economic Leaders' Meeting is taking place in Peru, and one of the priority areas of focus this year is "Sustainable growth for resilient development". From developing green finance to supporting the world's sustainable projects, China's practices is a success story others can learn from.

Sustainable finance requires to make investment decisions not only focusing on how to generate cash flow, but also on the overall performance in terms of environmental issues, social obstacles and corporate governance (ESG). Currently, green finance has gained the highest degree of consensus among countries in sustainable finance, because the growing problems of pollutant emissions from industrialization and climate warming require countries to come up with proper solutions.

China's rapid growth in green finance

Data from the People's Bank of China (PBOC), the country's central bank, shows that as of September 2024, China's green finance loans and bond balance was about 38 trillion yuan ($5.25 trillion). Among them, green loans amounted to about 36 trillion yuan ($4.98 trillion), more than four times as much as that in 2015, and the green bonds reached about 2 trillion ($280 billion), both ranking first in the world. 

The rapid development of green finance in China was attributed to the good interplay between the leadership, state departments, financial and industrial enterprises. The Communist Party of China (CPC) Central Committee and the State Council, China's cabinet, issued the Integrated Reform Plan for Promoting Ecological Progress in September 2015, which for the first time proposed that China would establish a green financial system, and made it clear that financial institutions were encouraged to step up grants of green loans. Seven state departments including the PBOC and the Ministry of Finance jointly issued the Guidelines for Establishing the Green Financial System in 2016 to encourage more social capital to invest in green industries. 

Nowadays, more and more Chinese companies listed on the stock exchanges in Shanghai, Shenzhen and Beijing have started to disclose their ESG reports, and the concept of green development has been deeply rooted in people's minds through green finance.

Green finance promotes China's green development

In recent years, the world has been witnessing China's splendid green development process in green energy, electric vehicles and so on. China's green finance has tightly focused on supporting its green industry. 

In most cases, at the early stage of a green industry, the sector wants the credit departments to provide sufficient and "green discount" loans, and it also wants equity and debt investors to have the courage to bear a higher risk preference. However, investors are usually hesitant to invest in green sectors because of the concern on future profits and tech uncertainties. As a result, there is usually a lack of sufficient and cheap capital to support green projects. 

China has used the combination of market, fiscal subsidy and government-guided process to finish the start-up of many Chinese green industries, such as electric vehicle, lithium batteries, etc. After the initial long time green investment, Chinese green industries have started to show their momentum since 2020, with products' quality and profitability largely improved. 

Nowadays, a positive cycle between green finance and green industries has been set up in China, and the success of green industries has greatly contributed to the country's overall environment. Chinese people can continue to enjoy green mountains, clear waters, blue skies and white clouds, thanks to the comprehensive social benefits brought forward by green finance.

China provides green financial support for world's green development

China has done a lot of work on overseas green finance and projects. It announced in 2021 that it would no longer build new coal-fired power plants overseas and would instead focus on supporting green and low-carbon energy projects in developing countries.  

According to data provided by Australian think tank Climate Energy Finance, China has finished $100 billion in outbound clean-tech investments since 2023. 

China's financial institutions have also actively raised funds for green projects worldwide. For example, on May 16, 2024, the Industrial and Commercial Bank of China successfully issued“Carbon Neutrality"-themed international green bonds, raising $1.74 billion. The bond was listed on Hong Kong, Singapore and London stock exchanges at the same time, promoting the green development of the world with practical actions.

The 31st APEC Economic Leaders' Meeting is being held in Peru, one of the world's leading green energy's mining (copper, lithium for instance) country. It is important for world leaders to meet face to face, to discuss sustainable development and to provide guidance for future cooperation. China's achievements in promoting green finance and green industry can provide one of the best case-studies for the sustainable finance and sustainable development proposal advocated by APEC this year.