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Green finance a boost for China


03-24-2017 08:26 BJT

Full coverage: 2017 Boao Forum

(Source: CGTN)

Green finance will be a key topic of discussion during Saturday's session of the ongoing Boao Forum. Green finance is poised to be the next trillion dollar sector and China will be playing a leading role. Our Laura Luo hops on an electric bus to see how green finance policies will help jump-start China's environment protection efforts.

On the outskirts of Beijing, smoke-free electric buses are running quietly on the roads of Pinggu. Yu Lianzhu, the owner of a local bus company -- says he wants to do his bit for Beijing's blue skies.

"Previously our buses were mainly powered by diesel, which produced hefty pollution in the atmosphere, and became heavy smog," Yu said.

Yu's company was among the first to respond to the government's call for an upgrade to clean energy bus fleets.

"Because the government will reduce its subsidies in 2017, this means if we didn't replace our buses in 2016, we would have to pay at least 200 thousand yuan more to buy each bus this year," Yu said.
Yu urgently needed to seal the deal before the end of last year. But Chinese banks' tough collateral rules came between him and timely loans. That was until green finance policies cleared the way.

"We made the loan in two steps, first issuing 30 million yuan of loans to him to meet his urgent needs. It was based on his good credit record over the long run. In the later stage, we also look at real estate related collateral," Liu Jian, assistant president of Beijing Pinggu Branch, ICBC, said.

The concept was highlighted during last year's G20 summit in Hangzhou. But as yet green financing structures remain flat, with high costs.

These are the buses Yu's company bought last year. Besides money taken from his own pocket, the replacement project was heavily subsidised by the government and financed by banks. Yu said without the support, the cost of going green is simply unbearable.

"We mainly consider companies' future repayment ability, for instance in the public transportation industry, we calculate sales for one, and the other major consideration is government subsidies," Liu said.

But what about green projects without government subsidies?  We asked an expert in water treatment.

"Financial institutions have to understand the environment protection industry. For example, if a water pollution treatment plant's future cashflow is not clear, can financial firms recognise its right to charge fees in the future? Financial institutions are lacking in industry knowledge at the moment. And it's often difficult for green companies to explain themselves clearly when it comes to fund raising," Wang Mai, chairman of Guoneng Huanke Environment Protection, said.

Wang said the green finance system needs more layers, including bonds and venture capital.

"Energy companies for example, they're asset-heavy and would need debt financing. Meanwhile some firms collecting tariffs online are asset-light. They can consider equity investment and venture capital can come to this industry," Wang said.

The State Council estimates that China will need to issue 500 billion yuan in green bonds annually to help reach its emissions goal by 2030. China's 32 billion dollars in green bonds issued last year may have been the world's most but it's just the start of the journey to going green in the financial market.

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