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A boom in green fi nance has been the high- light of China’s financial sector in recent years, with the emergence of a variety of innovative credit products. However, China’s green fi nancial system still needs its incentives and regulatory frameworks improved.

Green fi nance refers to fi nancial services that fund economic activities supportive of environmental improvement, climate change mitigation and more efficient resource utilization, according to a joint document released by the People’s Bank of China (PBC), the central bank, and several other ministerial departments.

International leader

Chen Yulu, PBC Vice Governor, said China’s green fi nance is becoming a world leader, demonstrating accelerated development in an allround way.

According to Chen, the market’s toplevel design and primary institutional arrangements are both improving. In 2016, the PBC and other six ministries and commissions jointly issued guidelines on building the green fi nancial system, which defi nes the scope of green projects and the standards for green fi nance.

China’s green finance market grew steadily last year, with its basic systems upgraded and its support to the green economy enhanced.

In June 2017, the State Council announced the establishment of eight pilot zones for green fi nance reform and innovation in the four provinces of Guangdong, Zhejiang, Guizhou and Jiangxi as well as Xinjiang Uygur Autonomous Region, to explore models which can then be replicated in other regions. In the meantime, tools for green investment and financing have become increasingly diversified, and the financial environment further optimized. Initiatives raised by the G20 Green Finance Study Group have been incorporated into the G20 Leaders’ Communiqué at the 2016 Hangzhou Summit of the world’s largest advanced and emerging economies, which will rapidly increase global recognition of green fi nance.

Studies show that green investment focusing on climate and the environment usually have higher returns but lower fluctuations, and among the hundreds of green projects in recent years, most are profi table, according to Ma Jun, Director of the Center for Finance and Development at Tsinghua University and Chairman of the Green Finance Committee of the China Society for Finance and Banking.

According to Ma, more than 260 green funds have been set up, and innovations in green financial products, such as green asset-backed securities (ABS) and green exchange trade funds, are booming in recent years.

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