China’s banks ordered to support coal output

October 5, 2021|Written by David Clarke|People's Bank of China

China’s banking regulator said on Tuesday that lenders must provide sufficient support to the country’s coal and power sectors amid concerns over supply shortages.

In a move seemingly at odds with a climate-friendly agenda that has won praise from international experts, the regulator ordered banks not to withdraw or cut off loans to coal-fired power plants, coal mines and other specified projects.

“We should guide banking and insurance institutions to actively cooperate with local governments and support the main coal-producing areas and key coal enterprises in Shanxi, Shaanxi, Inner Mongolia and Xinjiang to increase the supply of power and coal,” the China Banking and Insurance Regulatory Commission (CBIRC) said in a statement.

The CBIRC and People’s Bank of China (PBoC) have previously encouraged financial institutions to expand credit to sustainable activities and curb lending to heavy-polluting industries. Their plans to require banks to establish dedicated green finance divisions were lauded last year by the Climate Bonds Initiative, a London-based NGO.

The PBoC ranked first among G20 central banks in the Green Central Banking Scorecard published this year by the campaign group Positive Money. The authors noted its use of climate-friendly monetary policy tools such as the acceptance of green bonds as collateral against its lending to banks.

The move to boost coal financing appears to be a response to the pressure on supplies resulting from toughening emissions standards, increased demand from manufacturers and recent heavy rain and flooding. Authorities are concerned that consumer heating will be disrupted over the winter.

While issuing its guidance to banks to support the coal sector, the CBIRC warned that funds must not be used for speculating and profiteering on coal or other bulk commodities.

China’s energy system remains heavily reliant on coal, and the country’s coal consumption is expected to continue rising for several years despite Beijing’s pledges to boost the use of clean energy and curb greenhouse gas emissions.

This page was last updated October 5, 2021

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