{"id":15721,"date":"2025-04-14T12:30:00","date_gmt":"2025-04-14T12:30:00","guid":{"rendered":"https:\/\/focus.cbbc.org\/?p=15721"},"modified":"2025-04-15T18:34:17","modified_gmt":"2025-04-15T18:34:17","slug":"china-releases-its-first-green-sovereign-bonds-in-london","status":"publish","type":"post","link":"https:\/\/focus.cbbc.org\/china-releases-its-first-green-sovereign-bonds-in-london\/","title":{"rendered":"China releases its first green sovereign bonds in London"},"content":{"rendered":"\n

Experts say the green sovereign bonds will attract international investment in China\u2019s green transition, bringing private funding and boosting international climate cooperation, writes Jiang Mengnan for Dialogue Earth<\/h2>\n\n\n\n

On 2 April, China\u2019s Ministry of Finance debuted its first ever green sovereign bonds on the London Stock Exchange. The money raised will go towards projects in China in sectors such as clean transportation, marine conservation and recycling.<\/p>\n\n\n\n

The event makes China the latest of more than 50 jurisdictions to issue green sovereign bonds, Xie Wenhong, head of the China Programme at the Climate Bonds Initiative (CBI), told Dialogue Earth. The industry had long been looking forward to China following suit, he said.<\/p>\n\n\n\n

Dialogue Earth consulted several experts regarding the launch. Broadly, they welcomed it as a move that would help spur international investment in green projects in China, and offer the country an opportunity to deepen climate cooperation with the UK and EU. China could also include green investment plans in its new climate action plan under the Paris Agreement, they said.<\/p>\n\n\n

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How significant was the bond issuance?<\/h4>\n\n\n\n

Governments issue green sovereign bonds to raise funds for environmental protection and green development. The money is often invested in areas such as renewable energy, low-carbon transport, green buildings and conservation. It supports national green-development strategies and attracts international investment to projects related to sustainability.<\/p>\n\n\n\n

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What are the different types of bonds?<\/figcaption><\/figure>\n\n\n\n

China\u2019s green sovereign bonds issue in London was worth RMB 6 billion (GBP 624.38 million). Of this, half have a 3-year maturity at 1.88% interest, and the other half a 5-year maturity at 1.93%.<\/p>\n\n\n\n

For comparison, in 2016 China issued RMB 3 billion of ordinary sovereign bonds in London. Xie explained that it is normal for green sovereign bonds issues to be comparatively large. Germany, for example, issued USD 7.7 billion of green bonds in 2020, alongside ordinary sovereign bonds to the same value.<\/p>\n\n\n\n

However, Xie notes that consideration needs to be given to the demand for green funds, and whether it will be possible to use all the money raised. The first ever green sovereign bond was a USD 800 million 5-year bond issued by Poland in 2016, according to a\u00a0report<\/a>\u00a0by the CBI. EU nations, including France, Germany and Hungary, followed suit, along with emerging economies such as Chile, Indonesia and Thailand. In 2017, France issued USD 7.5 billion worth of 22-year green sovereign bonds and has since \u201ctapped\u201d, or increased, the size of the issue to USD 29.5 billion. In 2020, Egypt issued USD 750 million of 5-year green sovereign bonds, the report notes.<\/p>\n\n\n\n

China\u2019s debut of RMB 6 billion (USD 824 million) is not particularly large. Mao Xuxin, head of the Bank of China\u2019s London Research Centre, told Dialogue Earth it was understandable for China to keep its first green sovereign bond issue relatively small as it would lead to a higher ratio of bids to sales. According to Xinhua<\/a> News Agency, the London bonds \u201cspurred strong demand\u201d from international investors. This was despite the interest rates being lower than those of regular government bonds issued in Hong Kong at a similar time, with a similar maturity length. In the end, the bids were 6.9 times greater than the bonds available, Xinhua reported.<\/p>\n\n\n\n

Issuing an RMB-denominated bond in London has another advantage for China: it helps internationalise the currency, says Zhang Chuanjie, an environmental, social and governance (ESG) senior researcher at the Bank of China\u2019s London branch. Growth in green finance, Zhang explained, is seen as a way to drive that process, within which the UK is a key location.<\/p>\n\n\n\n

\u201cGlobally, the UK has always been an important site for the RMB foreign exchange spot market. After Hong Kong, London and Singapore are the two most important international centres of RMB business,\u201d he said.<\/p>\n\n\n\n