China flexes its economic muscles to push green finance on the New Silk Road

Deborah Lehr says Beijing’s leadership on the ‘Belt and Road Initiative’ means it can encourage partners to emulate its plans for sustainable development

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President Xi Jinping holds a press conference after a summit at the Belt and Road Forum for International Cooperation in Beijing in May. Xi said his initiative to develop economic links along the ancient Silk Road and beyond will help rebalance globalisation. Photo: Kyodo

Published: 3:58pm, 4 Oct 2017Updated: 7:04pm, 4 Oct 2017

China’s “Belt and Road Initiative” is likely to transform trading routes from Asia to Africa, the Middle East to Russia. With the world’s largest foreign reserves and a determination to build political and economic ties with strategically important governments, China is helping finance much-needed major infrastructure projects along the modern Silk Road. China is also using its economic might to promote its own set of standards, and nowhere is this more evident than in the field of green finance.

China has launched the world’s largest green bond market, officials’ promotions are linked to meeting environmental targets and banks grant preferential interest rates to sustainable projects. China will soon create the world’s largest experiment in pricing carbon with its national exchange.

Villager Chen Jiayin sells lotus seedpods in Haotang Village, Xinyang City, in Henan province on August 8. Haotang Village, which many regard as one of the most beautiful in China, has become an experimental area for sustainable development. Photo: Xinhua

China is also using its platform for green finance to encourage other countries. At the Belt and Road Forum in May, President Xi Jinping said, “We should pursue the new vision of green development and a way of life and work that is green, low-carbon, circular and sustainable,” and his words are being translated into action.

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At the forum, China’s Ministry of Environmental Protection and the United Nations Environment Programme announced an international coalition for green development on the belt and road. UNEP sees tremendous opportunity in the initiative to promote massive sustainable development and be part of the reconstruction of war-torn countries like Afghanistan and Iraq. They also see it as an opportunity to require green standards both in financing and construction.

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UNEP is offering its full range of resources. Erik Solheim, executive director of UNEP, wrote in an op-ed that, “Our environmental expertise runs from sustainable finance and clean technologies to ecosystems and sustainable consumption and production. ... Through our Finance Initiative, we can work with private investors to promote sustainable investment practises along the Belt and Road.”