Green Credit, Green Stimulus, Green Revolution? China’s Mobilization of Banks for Environmental Cleanup

TLDR

China is addressing severe environmental problems by embedding environmental targets in 5‑year plans and adopting market‑based mechanisms, notably green credit, which is overseen by the Ministry of Environmental Protection, the People’s Bank of China, and the China Banking Regulatory Commission. The study aims to ensure the green credit policy’s future success by improving environmental data collection, providing technical guidance, and offering genuine financial incentives to banks. In its fourth year, the green credit policy has withstood China’s post‑financial‑crisis economic turbulence, and its continued success may give China confidence to tackle overseas environmental and social conduct of enterprises.

Abstract

To tackle China’s profound environmental problems, Chinese leaders are now incorporating environmental targets in 5-year plans and experimenting with market-based mechanisms to supplement their traditional command and control mechanisms for environmental protection. In the recent years, China has produced a series of green policies, including green tax, green procurement, as well as green policies relevant to the financial sector, namely, green credit, insurance, and security policies. Of the three, the green credit policy is the most advanced, with three agencies (the Ministry of Environmental Protection, the Peoples’ Bank of China, and the China Banking Regulatory Commission) sharing the responsibility for implementation. The policy, approaching its fourth year of implementation, has proved resistant to China’s massive economic upheaval following the global financial crisis. Its future success depends on effective environmental data collection and dissemination, technical guidance, and provision of true financial incentives for banks. The continued success in implementation could potentially provide China with the experience and confidence to address new challenges, such as the environmental and social conduct of its enterprises overseas.