This executive summary is based on the full report, “China Green Finance Status and Trends 2024-2025” by Mengdi Yue and Christoph Nedopil, published by the Griffith Asia Institute and the Green Finance & Development Center. The report provides a comprehensive analysis of China’s green finance policies, market developments, and strategic recommendations to accelerate the sector’s growth.
Introduction and Background
In 2024, China made substantial progress in green finance through strategic policies and regulatory advancements. Key initiatives included the “Opinions on Comprehensively Promoting the Construction of a Beautiful China” and the “Green and Low-Carbon Transition Industry Guidance Catalogue.” These policies aimed to bolster green financial systems, including green bonds, the carbon market, and ESG disclosures.
Key Developments and Volumes of Green Financial Instruments
Green Loans
By Q3 2024, China’s outstanding green loans reached 35.75 trillion yuan (approx. USD 4.9 trillion), a 19% increase from 2023. These loans represented 13.9% of total outstanding loans, with significant allocations to green infrastructure and clean energy projects.
Green Bonds
The green bond market faced a slowdown, with issuance volume decreasing by 18% compared to 2023. Green bonds comprised only 0.85% of China’s domestic bond market, down from 1.17% in 2023. Specialty bonds showed resilience:
- Carbon-Neutral Bonds: Issuance volume grew by 7%, with a 19% increase in the number of bonds.
- Blue Bonds: Issuance volume surged by 519%, albeit from a low base.
Transition-Related Bonds:
Issuance of transition-related bonds accelerated, reaching 64.86 billion yuan in 2024, a 53.6% year-on-year increase. Sustainability-linked bonds were the most prominent, contributing 34.97 billion yuan.
Green Insurance
Green insurance products expanded significantly. As of August 2024, insurance coverage reached 469 trillion yuan (+23.4% YoY), with claims payments rising by 77.8% to 116.25 billion yuan.
Green Funds
Green funds experienced a strong rebound in 2024. Eight green bond funds were launched, with a total issuance of 56 billion yuan, compared to 10.5 billion yuan in 2023. Notable funds included:
- The CSI-CITIC Biodiversity-Focused Credit Bond Index.
- The JPMorgan Common Ground Taxonomy Green Bond Fund (6 billion yuan).
- The Neuberger Berman Climate Change High-Grade Bond Index Fund (6 billion yuan).
Challenges and recommendations
Challenges
- Market Penetration: Green bonds remain a small part of the total bond market.
- Private Sector Participation: Although improving, non-SOEs only accounted for about 20% of green bond issuances.
- Policy Implementation: Consistent policy execution across regions is challenging.
- Risk Management and Capacity Building: Financial institutions need better tools for climate risk assessment and carbon accounting.
Recommendations
- Establish national transition finance policy: Use G20 principles and local pilot lessons to define eligible activities, verification standards, disclosure requirements, and penalties for companies.
- Align financial regulations: Revise restrictions on high-emission industries and integrate transition finance metrics into green finance performance evaluations.
- Standardize green fund policies: Create unified definitions, evaluation criteria, and investment guidelines.
- Expand green insurance products: Develop diverse offerings, enhance risk assessment, and use technology for pricing and claims management.
- Diversify the green bonds market: Encourage non-SOE issuers, boost long-term green bonds.
- Expand the national carbon market: Include new industries to enhance liquidity and efficiency.
- Build green finance capacity: Promote tech use for data, risk assessment, and sustainability metrics in financial institutions.
- Incentivize green finance staff: Implement risk- and policy-adjusted incentives for sustained market growth.
- Support ESG investment: Launch government-led initiatives, pilots in mature markets, and standardize practices to boost investor engagement and public understanding.
Outlook for 2025
- Policy Continuity: Supportive regulations will continue to drive green finance.
- Innovation in Financial Products: Expect growth in transition bonds and sustainability-linked loans.
- International Collaboration: China’s engagement in global green finance initiatives will enhance cross-border investments.
- Technological Integration: Emerging technologies will improve transparency and efficiency.
- Capacity Building: Enhanced training will build expertise in green finance.
Mengdi Yue is a visiting researcher at the Green Finance & Development Center and previously was a researcher at the Green BRI Center at IIGF. She holds a Master in International Relations from School of Advanced International Studies (SAIS) and has worked with the American Enterprise Institute (AEI), European Union Chamber of Commerce in China and the China-ASEAN Environmental Cooperation of the Ministry of Ecology and Environment. She is fascinated by green energy finance in China and the Belt and Road Initiative and data analysis.
Dr. Christoph NEDOPIL WANG is the Founding Director of the Green Finance & Development Center and a Visiting Professor at the Fanhai International School of Finance (FISF) at Fudan University in Shanghai, China. He is also the Director of the Griffith Asia Institute and a Professor at Griffith University.
Christoph is a member of the Belt and Road Initiative Green Coalition (BRIGC) of the Chinese Ministry of Ecology and Environment. He has contributed to policies and provided research/consulting amongst others for the China Council for International Cooperation on Environment and Development (CCICED), the Ministry of Commerce, various private and multilateral finance institutions (e.g. ADB, IFC, as well as multilateral institutions (e.g. UNDP, UNESCAP) and international governments.
Christoph holds a master of engineering from the Technical University Berlin, a master of public administration from Harvard Kennedy School, as well as a PhD in Economics. He has extensive experience in finance, sustainability, innovation, and infrastructure, having worked for the International Finance Corporation (IFC) for almost 10 years and being a Director for the Sino-German Sustainable Transport Project with the German Cooperation Agency GIZ in Beijing.
He has authored books, articles and reports, including UNDP's SDG Finance Taxonomy, IFC's “Navigating through Crises” and “Corporate Governance - Handbook for Board Directors”, and multiple academic papers on capital flows, sustainability and international development.
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