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China gets to grip with green bonds but net zero goal still way off

China moved past the US in global green bond issues in the first quarter of this year – driven by Beijing’s goal of net zero carbon emissions by 2060 – but analysts say the country still faces having to raise $21.33 trillion of debt financing over the next 40 years to meet that target.

Chinese issuers including banks, property developers, power generators and railway operators sold $15.7 billion of bonds during January to March to fund ‘green’ projects such as clean and renewable energy, according to Refinitiv data, to help fund President Xi Jinping’s estimated $21 trillion carbon neutrality pledge

The volume of such bonds, mostly yuan-denominated, almost quadrupled from a year earlier, the data showed.

Read more: China’s Xiaomi to launch electric car business with $10bn investment

That exceeds the roughly $15 billion of such bonds sold by US issuers in the first quarter, and helped drive a tripling of green bond issuance globally.

Green bonds blossomed “largely thanks to China’s recovery from the coronavirus,” said Nathan Chow, strategist at DBS. “In addition, the Chinese government is going all out to develop this market this year.”

China, the world’s biggest emitter of carbon dioxide, needs 140 trillion yuan ($21.33 trillion) of debt financing over the next 40 years to meet its net-zero emissions target, investment bank China International Capital Corp (CICC) estimates.

Last month Citi issued its first ESG (Environmental, Social and Governance) structured bond that is redeemable in US dollars or the Chinese RMB. Proceeds of the bond will be used to support Citi’s global ESG targets.


With roughly 800 billion yuan of green bonds outstanding, China is already the world’s second-biggest green bond market after the United States. However, green bonds account for less than 1% of China’s $18 trillion bond market.

At this stage, “companies have no cost advantages issuing green bonds. and there’s not enough market support for many green projects which take a long time to complete and are seen as risky,” said CICC economist Zhou Zipeng.

Several fund managers said green bonds are not yet on their investment radar. “The only thing Chinese investors currently look at is yield. So obviously if green bonds cannot offer the extra returns, they ask the government, ‘what can you do to help me?’,” said Ricco Zhang, Asia-Pacific director of the International Capital Market Association (ICMA).

  • Reporting by Reuters

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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


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