Over the past 30 years, China has developed rapidly to become the world’s second largest economy, reaching the status of a middle-income country. Realizing this success, however, has involved a development approach entailing massive and inefficient resource use, and extensive damage to the quality of air, water and soil. Transforming from a resource- and pollution-intensive economy to a green economy is now a strategic priority for China. Success depends on the development of green industries and the transformation and reduced importance of many traditional industries. Success will be built heavily on green finance, and this is where China is headed.
The aim of this book is to develop specific proposals for greening China’s financial system, based on an analysis of current practice in China and an exchange of experience with international experts. The book proposes a framework for actions covering five key areas that, if adopted by the Chinese government, would promote the systematic development of green finance:
A. Establish and strengthen legal frameworks, including environmental laws and law enforcement that contribute to the demand for green finance.
B. Improve coordination and information sharing between environmental, financial and industrial regulators and with third-party institutions.
C. Develop comprehensive policy support for green finance, and in specific:
1. Align monetary policy with sustainable development goals.
2. Continue to strengthen green credit policies in banking.
3. Provide incentives to grow the market for green securities, including green bonds.
4. Expand the scope of green insurance and strengthen environmental liability insurance regulations.
5. Use fiscal incentives to accelerate the development of green finance markets.
D. Foster the development of the information infrastructure with information on environmental costs and a green credit rating system.
E. Green the policy banks as leaders in establishing markets and best practices for commercial banks.