Cheap green loans funded by China’s central bank could accelerate clean, energy saving projects, analysts say
- People’s Bank of China is offering cheap funding to banks to subsidise their lending to green projects
- Potential savings from lending facility may not be substantial, CICC analysts say
“The launch of this tool provides cheaper funds for banks’ lending to carbon emission reduction projects, and could boost banks’ enthusiasm for funding this sector,” Hu Hongyu, analyst at Hwabao Securities, said in a note this week. The scale of loans, “especially in the fields of clean energy, energy saving, environmental protection and carbon emission reduction technologies”, will expand in the future, he added.
China is the world’s biggest greenhouse gases emitter, at more than 10 billion tonnes a year. Its president, Xi Jinping, has set a target of peak emissions by 2030 and carbon neutrality by 2060. In September, he also announced that China would stop building new coal-fired power plants overseas.
Moreover, on Monday, the PBOC directed financial institutions to focus on helping industries that are in the early stages of development but have huge potential in carbon emissions reduction, especially in the clean energy, energy saving, environmental protection and decarbonisation technologies sectors. Stocks of energy storage, photovoltaic and energy-saving sectors surged by more than 9 per cent the following day.
Under its new liquidity tool, the central bank will lend to banks at an interest rate of 1.75 per cent for one year. The banks can use these funds to lend to green projects at a higher rate, in line with China’s loan prime rates, which stands at 3.85 per cent for one year and 4.65 per cent for five years.
