PBOC plans green credit facility

August 4, 2021|Written by |Bank of Japan, People's Bank of China

The People’s Bank of China (PBOC) will offer banks low-cost funding to provide discounted loans to companies with “significant impacts on emission reduction”, according to minutes of a July 31st meeting. The move makes the Chinese central bank the second major central bank in the world to announce a green lending facility, following the Bank of Japan’s June announcement of similar targeted refinancing operations.

A mechanism of political accountability for the PBOC, the meeting was attended and chaired by People’s Bank Party Committee members and was intended to “convey and study the overall judgments of the Party Central Committee and the State Council.” Addressed by PBOC Governor Yi Gang and Party Secretary Guo Shuqing, the minutes are a formal summary of the work done by the PBOC in the first half of the year, together with a To-Do list for the second half.

A high priority for the central bank, second only to price and economic stability, is to “expedite the process of building a green financing system.” The PBOC promises to “study the establishment of carbon emission reduction support tools, publish a new version of the green bond support project catalog, launch carbon neutral bonds in the inter-bank market, establish an evaluation mechanism compatible with the carbon peak carbon neutral target incentives, and improve the green financial evaluation of banking financial institutions.”

The Bank will also “promote the disclosure of carbon emission information and green finance evaluation, strengthen climate risk management and carry out climate risk stress tests in an orderly manner.”

A report released by the PBOC prior to the meeting shows that the balance of China’s green loans in local and foreign currencies increased by 26.5% last year, making China the largest holder of outstanding green loans in the world. The growth rate in Chinese green loans during the second quarter was 14.6% higher than that for all kinds of loans, the report showed.

Although China’s climate response is not aligned with the IPCC pathway to the Paris Agreement target on global heating, and the country finances most coal plants built today, the PBOC has shown international leadership on climate change. The central bank was one of the eight founding members of the Network for Greening the Financial System (NGFS) and has been an active international participant in climate-related forums and initiatives.China also featured at the top of a recent ranking of G20 central banks and financial supervisors according to their response to climate change. The Positive Money survey behind the ranking, which placed the EU 5th and the US 13th, placed the PBOC ahead of other central banks in both green monetary and financial policy development and implementation.

This page was last updated August 4, 2021

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