How can we green the third largest bond market in the word and support the transition towards a low carbon growth path and green economy? The report Facilitating Cross-Border Capital Flows to Grow China's Green Bond Market explores the challenges of increasing inter-country capital flows into China’s green bond market and puts forward potential measures and solutions to facilitate and improve capital flows to support the expansion of green investment and the green bond market.
Identified challenges include lack of awareness of green bonds among potential issuers; limited knowledge of Chinese green bond market by international investors; approval process of green bond issuance overseas; differences between China’s green definitions and internationally accepted green definitions; lack of information on China’s green bond market; domestic market access; capital flow controls and lack of hedging tools and domestic credit ratings.
Recommendations include market education and information sharing (raising Chinese issuers’ awareness of green bond opportunities through market education activities and demonstration issuance; improving international investors’ understanding of China’s green bond market through investor roadshows and engagement platforms; developing green bond database, indices and ETFs), policy, guidance and incentives (establishing and using internationally accepted green bond standards and Certification schemes; simplifying approval process for green bond issuers; providing guidance on reporting and disclosure; providing clearer policy guidance on market entering schemes; providing clear policy signals and guidance on capital flow controls to manage investors’ perceptions) and market infrastructure (developing RMB hedging instruments; improving domestic credit rating practice, and opening the market to international credit rating agencies).
Also available in Chinese.