China green bonds set to take off

Green bonds, a financing tool to help the development of sustainable sectors, are likely to see fast expansion in China after regulators launched guidance on issuance, said analysts.

The guidance, introduced by the China Securities Regulatory Commission in early March, said that more measures will be taken to help the bond market support enterprises that develop environmentally-friendly or sustainability projects, by issuing corporate bonds and asset-backed securities.

In the Government Work Report delivered by Premier Li Keqiang in the fifth session of the 12th National People’s Congress, supporting the development of a green economy is listed as one of the economic and social development targets for the country.

Liu Wei, deputy director with bond business arm at the Shanghai Stock Exchange, said that China’s green bond started to boom in 2016, and it has great potential to expand fast in the near future.

Liu said: “When conditions become mature, the SSE will launch green corporate bonds trading, making it a transparent trading platform for green corporate bonds. Currently, the SSE is compiling a green corporate bond index for companies listed in Shanghai .”

Green bonds can back a wide range of projects or uses such as renewable energy infrastructure, energy-efficient housing, and green transportation.

According to data from the Securities Association of China, 13 brokerages have become underwriters of 11 green bonds with total value of some 21 billion yuan ($3.04 billion), among which two are ABS products with combined value of 2.7 billion yuan.

Currently, major distribution channels of green bonds focus on the interbank market, which can be further expanded, and reach more investors.

Ma Jun, chief economist at the Research Bureau of the People’s Bank of China, said the green bond is a financing tool for medium-and-long-term projects, which will benefit both the green economy and the bond market, adding to the variety of financial products.