June 16, 2017 / 7:54 AM / 2 years ago

China central bank plans fresh incentives to support green financing

BEIJING (Reuters) - China’s central bank plans to step up support for “green” financing, including incentives to encourage banks to extend more loans for projects friendly to the environment, a deputy governor, said on Friday.

FILE PHOTO: People walk past the headquarters of the People's Bank of China (PBOC), the central bank, as two paramilitary police officials patrol around it in Beijing November 20, 2013. REUTERS/Jason Lee/File Photo

The People’s Bank of China is studying plans to add banks’ qualified green credit into collateral for monetary policy operations and to include institutions’ green credit performance in the central bank’s macro-prudential assessment (MPA), Chen Yulu told a news conference.

The government has given interest rate subsidies and preferential tax treatment for green projects, on top of special loans from the central bank, the PBOC deputy governor said.

Efforts will be made to innovate China’s green financing and lure more medium- and long-term private investment, he said.

China will unify its standards on identifying green projects and “green bonds”, and improve market transparency to ensure green funds are targeted at appropriate projects, Chen said.

Green projects with steady cash flows should rely on green bonds, while projects with higher potential risks should depend more on private equity funds and share listings, he said.

Green financing faces obstacles due to lower returns and higher risks from projects, but such funding has big “long-term potential”, Chen added.

China’s cabinet on Wednesday said the government will encourage domestic and overseas investors to participate in “green financing”, and will set up pilot areas to experiment with green finance reforms.

China and the Asia Development Bank (ADB) have launched a green financing platform to support efforts by small- and medium-sized enterprises to cut pollution in the smog-hit Beijing-Tianjin-Hebei region, the ADB said on Friday.

China needs at least 2 trillion yuan ($293.53 billion) of green investment annually over the next five years to promote environmental protection and reduce the effects of pollution from its rapid industrial growth over the past three decades.

Reporting by Kevin Yao; Editing by Richard Borsuk

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