China has set up a platform to help the country’s small and medium-sized enterprises (SMEs) secure access to financing for air-pollution reduction investments. The China National Investment and Guaranty Corporation (I&G) launched on June 16 a green financing platform (GFP) designed to assist the SMEs in fighting pollution in the region of Beijing, Tianjin and Hebei (BTH).

The platform, supported by the Asian Development Bank (ADB), will promote air pollution-reduction investments in the region. It is estimated that 60% of industrial pollution comes from SMEs, but many of them lack experience in fighting pollution, and lack the finance to switch to cleaner processes.

Ayumi Konishi, director-general for East Asia Department at ADB, says that expanding competitive financing, particularly to SMEs, in all polluting sectors is crucial to translate policies and regulations for better air quality into sustainable results on the ground. “The reality is, even though SMEs realize the need to invest in cleaner production facilities, they often do not have access to finance,” he adds.

According to ADB, poor air quality is considered to be contributing to about one million premature deaths annually in China, and costing the economy about 7.5% of gross domestic product. The Chinese government has made some progress in addressing the problem in recent years, particularly by introducing new policies, new air quality standards and a nationwide action plan. However, the impact is still limited because the BTH region relies heavily on coal and is home to a high concentration of pollution-intensive industries and huge number of polluting vehicles.

The state-owned I&G was selected by the government to develop an appropriate facility, and ADB approved a loan of 458 million euros (US$499.6 million) in December 2016 to help I&G set up GFP, which is expected to also leverage an equivalent 3.6 billion euros in domestic commercial financing. With credit enhancement measures, GFP will help SMEs to have easier access to loans from commercial banks. State Development and Investment Corporation, the controlling state-owned enterprise of I&G, will provide oversight of the implementation of GFP.

The establishment of GFP is the second part of envisaged multi-year ADB support to improve air quality in the BTH region. ADB approved a first ever policy-based loan for China in December 2015 as the first support in this regard, and successfully implemented it in 2016.

To address the complex challenge of air quality improvement in this vast region, the Chinese government and ADB agreed on a lending programme of about US$500 million per year for 2016-2020. The ADB assistance over this period will focus on strengthening policies and regulatory frameworks, developing financing facilities to unlock investment in areas of need, and leapfrogging technologies in key sectors.