Letters | China’s local governments are missing out on a major source of funds – green bonds

Readers discuss a little-tapped funding source for China’s indebted local governments, why the waste charging plan failed, and the continuing need for English language training

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Workers install photovoltaic panels in Zhongwei, in China’s northern Ningxia region on May 9. Research has shown that nearly 20 per cent of the bonds put on the market by local governments in 2022 could potentially qualify as green bonds. Photo: AFP

Published: 11:30am, 5 Jun 2024

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Investor interest in the ultra-long-term special government bonds rolled out last month by the Ministry of Finance has caught the eye of indebted local governments hungry for funds. But where are the local-level solutions to help them leverage more financial resources? Green bonds could be one such solution.

The scale of the issuance of green bonds in China has been growing rapidly at the national level. In 2023, China issued US$131.3 billion of labelled green bonds in domestic and overseas markets. State-owned enterprises are the main issuers, and the funds raised are mainly used for clean energy industries, green infrastructure and similar initiatives.

Locally, however, green bonds are still not well-understood or leveraged. Green bonds issued by local and provincial governments account for only 1 per cent of China’s total green bond market.

An April report by Greenpeace East Asia found that nearly 20 per cent of the bonds put on the market by local governments in 2022 could potentially qualify as green bonds. Issuing those bonds as green bonds would not only open new avenues for financing, but would also attract stronger investment both to these projects and to the local governments as a bond market.

So far, China’s efforts to attract financing or restructure debt have focused on the central government taking up more leverage, such as the recently-issued ultra-long-term special government bonds. But local debt requires local-level solutions.