By CGTN’s Laura Luo
Green finance is poised to be the next trillion-dollar industry, and China is playing a leading role. China issued the most green bonds in the world last year to support environment-related projects. But the nascent industry needs to reduce its reliance on bank loans, and find more sophisticated financing structures.
China's 32 billion US dollars of green bonds issued last year may have been a world number one, but it's just the start of the journey in going green in the financial market.
The green finance guidelines were highlighted during last year's G20 Hangzhou Summit. China's State Council estimates that the country will need to issue 500 billion yuan (72.58 billion US dollars) of green bonds annually, to help reach its emissions goal by 2030.
The new energy buses are displayed during the China International Automobile new energy and Technology Application Exhibition 2016. /CFP Photo
Yu Lianzhu, the owner of a local bus company said he wants to do his bit for Beijing's blue sky. Yu's firm was among the first batch to respond to the Chinese government's call to upgrade their fleet to clean energy.
"Previously our buses were mainly powered by diesel, which produced hefty pollution to the atmosphere, and became heavy smog. We were required to replace 80 buses with electric ones last year, according to Beijing's clean energy plan," Yu said.
Chinese banks' tough collateral rules came between Yu and bank loans. Thanks to the green finance guidelines, Yu did in the end secure his bank loan without the collateral.
An electric bus charge station in Beijing. /CFP Photo
But as yet, green financing structures remain flat, with high costs. Government subsidies do help during the "going green" process.
"For instance in the public transportation industry, we calculate sales for one, and the other major consideration is government subsidies," said Liu Jian, assistant president of Beijing Pinggu Branch of Industrial and Commercial Bank of China (ICBC).
A sewage treatment plant in Nanjing, Jiangsu Province, 2016. /CFP Photo
Yu said that without government subsidies, the cost of going green was simply unbearable. In that case, for those green projects without government support, a better understanding of green industry is urgent.
“Financial institutions are lacking in industry knowledge at the moment. And it's often difficult for green companies to explain themselves clearly when it comes to fund raising,” said Wang Mai, chairman of a water treatment enterprise.
