China sees boom in green bonds market

Chinese institutions have issued green bonds worth 551.143 billion yuan ($86 billion) amid the country's green drive, the Xinhua-run Economic Information Daily reported on Monday. In 2017, China issued 185 green bonds raising a total of 277.28 billion yuan, up 122.9 percent and 32 percent, respectively, from 2016, said the report.

A green bond is an innovative financing method used around the world, directing financial resources to environmental protection. Green bonds can ease financing demands for medium- and long-term green projects as banks are limited in offering such services. The Chinese mainland's first green bond was issued by the Agricultural Bank of China and listed on the London Stock Exchange in October 2015.

China has the world's largest green bond market. It accounted for nearly 40 percent of new green bonds in 2016, followed by the United States, France, and Germany, according to Moody's Investor Services, the bond credit rating agency.

The central government has been pushing for the development of green finance in order to seek sustainable growth and honor its commitments on addressing climate change. The country's banking and securi- ties sectors have issued guidelines that define a green project and outline the eligibility criteria for green bonds issuers.

Meanwhile, China's central bank Monday pumped 110 billion yuan (about $17.2 billion) into the financial system through open market operations. The operations included 60 billion yuan of seven-day reverse repos, 40 billion yuan of 14-day reverse repos and 10 billion yuan of 63-day reverse repos, the People's Bank of China said on its website. The interest rates for seven-day, 14-day and 63-day operations were unchanged at 2.5 percent, 2.65 percent and 2.95 percent respectively.

Offset by 90 billion yuan of maturing reverse repos, the net injection on Monday stood at 20 billion yuan. The central bank has increasingly relied on open market operations for liquidity management, rather than cuts in interest rates or reserve requirement ratios.This year, monetary policy should be kept neutral and the floodgates of money supply should be controlled, according to the Central Economic Work Conference held last month.

Moreover, Chinese securities regulator Friday approved five new IPO applications, which will raise up to 6.7 billion yuan ($1.04 billion) in the A-share market. Three companies will be listed on the Shanghai Stock Exchange and two will be listed on the ChiNext, a NASDAQ-style board, according to the China Securities Regulatory Commission. The firms and their underwriters will confirm dates and publish prospectuses following discussions with the exchanges.

China has sought to normalize IPOs to improve financing efficiency and direct more money into the real economy since it suspended IPOs between July and November 2015. New shares are subject to official approval under the current IPO system, which is moving to a more market-oriented system. China's forex marketmaking banks have voluntarily changed the "counter-cyclical adjustment factor," a currency-fixing tool, to the neutral stance in the pricing mechanism of the yuan's central parity rate in response to weakened yuan depreciation prospects.

Meanwhile, the counter-cyclical adjustment factor still plays a role in the quotation mechanism for central parity rate of the yuan, according to a statement released late Friday by a guild for the inter-bank forex market players. In May 2017, authorities introduced the counter-cyclical adjustment factor to the existing pricing model of the yuan's central parity rate against the US dollar, aiming to moderate pro-cyclical fluctuations driven by irrational sentiment in the foreign exchange market.