Green financing policy tools to be enriched: Central bank

Chinese central bank officials aim to enrich policy tools labeled "green financing" to spur economic recovery and leverage more financial resources for achieving carbon emission reduction goals.

China will promote the development of carbon emission rights and carbon financial markets, and improve the efficiency of a price-setting mechanism in the carbon trading market, according to Liu Guiping, vice-governor of the People's Bank of China, the central bank. 

The central bank continues to promote the development of the green financial market and innovation of financial products, encourage financial institutions to support large energy firms to exit the fossil energy industry in an orderly manner, and to develop emission reduction technologies, such as decarbonization, Liu said in a speech at a seminar in Huzhou, East China's Zhejiang province, on Thursday.

The PBOC is planning to include climate change risk management into its macro-prudential policy framework to prevent systemic financial risks, Liu added.

"The quality of China's green financial assets is sound. So far, the non-performing loan ratio of green financial products is much lower than the overall level of commercial banks' NPL ratio. In China, there are no default cases of green bonds up to now," Liu said.

A comparative study on green finance standards between China and Europe is about to finish, and it will provide an important guarantee for standardizing green financial business, achieving commercial sustainability and promoting green economic and social development, the vice-governor said.

An information management system of green finance business has been launched in Huzhou, in which the central bank started a green finance development pilot program. Use of this system will be expanded to the Yangtze River Delta region, Liu said in his speech.

By the end of the third quarter, the outstanding banks' lending designated as "green" achieved 11.55 trillion yuan ($1.76 trillion), the world's largest. By June, China's green bonds totaled 1.2 trillion yuan, ranked the world's second largest, indicated by the central bank.

China established a national green development fund in July, and the total value of the fund's first phase was 88.5 billion yuan.

In 2016, the PBOC issued a guideline about building a green finance system, which was the world's first policy framework of green finance made by a central government department, according to Liu.

PBOC Governor Yi Gang said in a video at the Singapore FinTech Festival on Wednesday that China will consider the possibility of mandatory requirements for financial institutions to disclose environment-related information, a measure to better support the country's "green recovery and green transition" as China has committed to carbon neutrality.