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China’s Carbon Neutral Target Set To Attract Global Funds

China’s Carbon Neutral Target Set To Attract Global Funds

(6 July 2021 – Hong Kong) China’s ambition to become carbon neutral will encourage more international investors to tap the mainland’s green bond market via the Bond Connect scheme, according to Hong Kong Exchanges and Clearing (HKEX).

The Bond Connect, which allows foreign investors to invest in mainland China’s US$17.5 trillion domestic bond market, marked its fourth anniversary on July 2. A southbound leg which will allow onshore Chinese investors access to Hong Kong debt market is identified as next step, but no launch date was mentioned.

The average daily turnover of Bond Connect was 26.6 billion yuan in the first six months of 2021, 34 percent higher than a year earlier. The average daily turnover in June was 30 billion yuan, 42 percent higher than a year earlier.

The issuance of green bonds by Chinese companies is expected to rise following a pledge by President Xi Jinping in September to attain carbon neutrality by 2060.

Yi Gang, governor of the People’s Bank of China, said in April the country’s carbon neutrality goal would cost the country about 2.2 trillion yuan (US$339.43 billion) annually through 2030, the year it expects carbon emissions to peak. After that, the yearly expenditure would rise to roughly 3.9 trillion yuan over the next three decades. If these estimates hold up, the total cost will amount to about 139 trillion yuan.

“China’s goal of achieving carbon neutrality by 2060 will create more opportunities for China to issue green bonds,” HKEX chief executive Nicolas Aguzin said during the annual Bond Connect summit. “International investors will be interested to invest in these green bonds.”

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