Looking to propose a new 5-year reform plan, China held its Fifth Plenum meeting last week that focused on everything from social to economic issues.
One of the hot topics being discussed on at the meeting focused around green policies. The Chinese government had already earlier committed to cut 2020 CO2 emissions by 40-45% from the level in 2005.
“The key points in China’s 5th Plenum communique appear to be in line with authorities’ efforts towards economic rebalancing. For instance, increasing the contribution of consumption to GDP remains an important aspect of the policy agenda,” says Atsi Sheth, associate managing director at Moody’s Sovereign Risk Group.
“The emphasis on innovation is consistent with efforts to move the economy towards higher value added activity. The communique also reiterates a commitment to gradual market reform by reducing state intervention in price setting and opening up the economy to competitive forces. In general, the policy announcements were in line with our baseline expectations.”
Through the use of environmental tax legislation and the backing of “Green finance” channels Chinese government hopes create incentives for green practices. This year has already been a milestone year for the Chinese government in the realm of green finance. In midway through this year China’s central bank, the People’s Bank of China (PBOC) drafted rules for a green bond issuance and defined what constitutes as “green.”
This subsequently led to the first green bond ever in China when energy company Xinjiang Goldwind issued its US$300 million instrument. The bond was heavily sought over and received orders up to US$1.4 billion, five times the original amount.
“In 2018 I expect China to be the largest Asian green bond issuer. I think Asia will represent a large slice of the global market,” predicts Sean Kidney CEO and co-founder of the Climate Bond Initiative a non-profit green bond advocacy group.
Since the Xinjiang Goldwind bond, China has stepped up its efforts to open the doors from green bond issues. Just this October Agriculture Bank of China (ABC) priced its US$1 billion green bond. “ABC has established a list of eligible green projects, and has so far evaluated and approved around 40 of such projects with total loan amount of about CNY10bn,” a Fitch report states.
