China loosens foreign capital curbs for some green projects
The move is part of the country’s ongoing efforts to encourage corporates to borrow medium- and long-term foreign debt
[BEIJING] China is easing restrictions on the amount of foreign capital that companies can raise for climate-related projects, as it seeks to curb greenhouse gas emissions and bolster its economy.
A pilot programme across 16 provinces and major cities, including Shanghai and Beijing, will ease quotas for domestic non-financial firms to borrow from non-residents in local and foreign currency, provided those projects are aimed at reducing corporate emissions, the country’s foreign exchange regulator said on Thursday (Aug 22).
“Green or low-carbon transition projects are permitted to occupy a smaller proportion of foreign debt risk-weighted balances,” said Lei Wang, head of analytical excellence and research for S&P Global (China) Ratings.
“While specific ratios have not yet been disclosed, this measure effectively reduces financing costs for green projects.”
The move is part of China’s ongoing efforts to encourage corporates to borrow medium and long-term foreign debt. At the Lujiazui Forum in June, Zhu Hexin, deputy governor of the People’s Bank of China, had mentioned the country will launch pilot projects for more offshore borrowing by the green sector.
In recent years, the world’s largest greenhouse gas emitter has been making efforts to attract foreign capital into clean-energy-related sectors by attempting to align green bond standards with the European Union and Singapore, and by introducing more pollution disclosures for companies. The country also issued its debut sovereign green bond in London earlier this year.
A NEWSLETTER FOR YOU
Friday, 12.30 pm
ESG Insights
An exclusive weekly report on the latest environmental, social and governance issues.
Clean-energy projects in provinces such as Zhejiang and Jiangsu require financing for equipment upgrades and research and development, said Crystal Geng, ESG research lead for Asia at BNP Paribas Asset Management.
Industrial hubs such as Hebei need funds for pollution control, Guangdong and Zhejiang are seeking investment for battery technology or charging infrastructure, and coastal cities such as Ningbo for ecological restoration, she said.
Demand for offshore Chinese credit has been strong across various currencies this year.
The Bloomberg China investment-grade US dollar bond index reached a “historic tight” spread of 60 basis points this week and investors are looking for more primary issuances of green bonds from Chinese entities, Christopher Li, head of Asia credit trading desk analysts at BNP Paribas, wrote in an e-mailed statement.
Share with us your feedback on BT's products and services
