CHINA GREEN
BOND MARKET2017

A USD37.1bn
Chinese Green
Bond Market

Published in February 2018 jointly by the Climate Bonds Initiative and China Central Depository & Clearing Company (CCDC), supported by HSBC.

The British Embassy Beijing is a
supporter of the Climate Bonds
Initiative in China

China Green Bond Market Annual Report 2017 1

China green finance highlights
In the past year, China has cemented its position as a key player
in the global green bond market with its regulators continuing
to use the tools available to encourage market growth, its issuer
base expanding and diversifying and both regulators and issuers
implementing measures to align with international best practice.

Contents

This is our second China Green Bond Market annual report,
in association with CCDC and supported by HSBC this year.
This report summarises the major developments that havetaken place during 2017 focusing on issuance, policy
development and wider market growth.

2017 firsts and trends 8

China green finance highlights 2
Green bond market
developments 2017 4

Green bond policy roundup 10
Things to watch for in 2018 11
Detailed charts and data 122017 highlights:
Addressing environmental
challenges has become a highpriority for the Chinese government
China’s economic growth has been aninternational success with over a billion people
raised out of poverty in just three decades.
However, the cost of this growth has become
clear with local air pollution, river pollution andgreenhouse gas emissions impacting humanhealth, ecosystems and climate change.
The Chinese government is shifting its
priorities in response to environmental
challenges. President of the People’s Republicof China, Xi Jinping, has emphasized thecountry’s commitment to build an ‘ecologicalcivilization’1. In his recent speech at the 19th
National Congress, the number of times that‘environment’ was mentioned outnumberedthat of the ‘economy’2. To achieve the goal of
ecological civilization, President Xi called
for promoting green development, which
includes developing green finance.

China continued its pioneering role in thegreen bond market in 2017
Following a record-breaking year in
2016, China’s green bond market
continued to thrive in 2017. Growth has
been characterised by a raft of policy
developments, growing momentum at the
local level and a diversification of issuer
types and use of proceeds.
Total green bond issuance4 from Chinareached USD37.1bn* (RMB248.6bn) in 2017
- a 4.5% increase year-on-year. 38% of thetotal issuance did not meet international
green definitions (USD14.2bn/RMB94.3bn)– this was higher than in 2016 when 33% of
issuance failed to meet international green
definitions (see more on page 4).

“We will create a market-based
system for green technology
innovation, develop green finance,and spur the development ofenergy-saving and environmental
protection industries as well as
clean production and clean energy
industries.”
Xi Jinping, President of thePeople’s Republic of China

China is a major player within a growing global green bond market
180
160

The People’s Bank of China (PBoC) estimatesthat an annual investment of at least RMB2tn-4tn(USD320bn-640bn) will be required to addressenvironmental and climate change issues in
China3. Attracting green finance is therefore
critical to China’s next stage of development.

140
120
100
Amount issued in USD bn*Note on figures: Figures used in this reportrefer to both onshore and offshore green
bonds issued by entities domiciled inmainland China, and green panda bonds
unless otherwise stated. Internationallyaligned green bonds are those aligned withboth local and international definitions ofgreen (see page 4) and they are statedseparately.

Despite tepid growth in issuance in the firstquarter of 2017, momentum began to pickup in the second quarter and into year-end,
making China the second largest source ofgreen bonds in the world.

Green bonds issued by Hong Kong and Taiwan
domiciled entities are not included in the
figures as the markets are separately
regulated. A summary of Hong Kong green
bond market can be found on page 6.

2 China Green Bond Market Annual Report 2017

80
60
40
20
0
2014

2015

2016

Other countries issuance (aligned with international definitions)
China’s issuance (aligned with both China and international definitions)
China’s issuance (aligned with China definitions only)2017

2017 saw new policy developments topromote green bonds as a tool to financeenvironmental solutions• The State Council set up pilot zones in 5
provinces including Guangdong, Guizhou,
Jiangxi, Zhejiang and Xinjiang to promote
green finance5.

The rapid growth in China’s green bondmarket over the past 2 years has been
primarily due to the implementation ofregulation and policy levers to encourage
the issuance of green bonds to finance green
infrastructure. This includes PBoC’s green
bond guidelines released at the end of 2015.

“A lot of green finance projects:
subways, railways, water treatment,
solid waste, new energy, etc., havelengthy investment periods. It mightbe 10, 15 or even 20 years before
investments see a return. This is far
beyond the loan periods offered bybanks in developing nations.

2017 saw the first mention of green
opportunities in the Belt and Road Initiative
In May 2017, President Xi proposed theestablishment of an international coalition
for the green development along the Belt andRoad. This was coupled with the ‘Guidanceon Promoting Green Belt and Road’ jointly
issued by four Ministries.6

In 2017, policy momentum continued with anumber of new developments including:• China Securities Regulatory Commission’s(CSRC) green bond guidelines for Chineselisted companies.

The best way to resolve this issue isgreen bonds. I think turning green
assets into bonds is an extremely
clever solution to the problem of loan
length, but it needs development.”

This a potential game changer for green
infrastructure across the region especiallygiven that a) initial BRI investments havetended to be conventional projects such as
roads and gas or coal plants, and b) the scaleof investment proposed (see page 7).

• Green Finance and Ecological Protection
were written into the 2017 Report on theWork of the Government (see page 10).

Dr. Ma Jun,
Special Advisor to PBoC Governor
and Chairman of China’s Green
Finance Committee

The Belt and Road Initiative (BRI) is a major
infrastructure and economic development
in countries along the Silk Road Economic
Belt and 21st-century Maritime Silk Road toboost global prosperity. Over 69 countries/
territories are involved across Asia, Africa
and Europe.

• The Fifth National Financial Work
Conference encouraged the developmentof green finance (see page 10).
• New guidelines for verifiers were released
by PBoC and CSRC in December 2017(see page 10).

2017 green bond issuance: China is a major player within a growing global green bond market
Spain $5.6bn
France $22.0bn
Netherlands $4.3bn
Sweden $5.3bn
Germany $9.6bn

Canada$3.4bnIndia $4.2bn
China Total issuance $37.1bn$22.9bn(aligned)+$14.2bn(not aligned)

United States$42.4bn
Mexico $4bn

Top 10 countries (>$3bn)$1-3bn$0.5-1bn<$0.5bn40

not aligned with international definitions

30aligned with international definitions

20
10

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$ Billions (amount issued)

Supranational $9.2bn

China Green Bond Market Annual Report 2017 3

China green bond market developments in 2017

Green bond issuance picked up from Q2
with the Q4 issuance almost 5 times aslarge as that of Q1. One reason for thecomparatively lower issuance in the first halfof 2017 was the rise of market rates at the
beginning of the year across all bonds (notunique to the green bond market). Comparedwith 2016, the yield of 3-year, 5-year and10-year sovereign bonds went up by 99bp,
89bp and 65bp respectively in the first halfof 2017.8 The rise of the secondary market
yields led to an increase in the interest ratein the primary market, significantly raisingfinancing costs for issuers and impeding
bond financing.

2017 China’s quarterly green
bond issuance
20
15
USD bn amount issued

Internationally-aligned green bondissuance from China reached USD22.9bn(RMB154.3bn)7 in 2017, comprising 15%
of global issuance (22% if including the
non-aligned bonds). This figure is slightly
lower than the USD23.6bn (RMB165.7bn)
reached in 2016. Despite the slightdecrease, China remains one of the largest
sources of issuance in the global green
bond market in 2017. Globally, the UnitedStates was the largest issuer in 2017 with
USD42.4bn, followed by China and France.
Other emerging markets, such as India and
Mexico were also among the top 10 issuers.

10

Aligned with international
definitions
Not aligned

5
0
Q1

Q2

Q3

Q4

by 2016 green bonds had not been fully
allocated and hence new or large issuance
was not yet considered by some of the banks.
The green bond market has, however,seen a comparatively high increase in thecontext of a difficult year for the domestic
vanilla bond market. PBoC statistics showthat the net financing scale of corporate
bonds dropped 85% from RMB3tn in 2016
to just RMB449.5bn in 2017 9 and that
equity financing surpassed debt financing
for the first time in a decade since 2008.10
This occurred amid a backdrop of an
ongoing deleveraging process and prudent
monetary policy which led to the tighteningof liquidity.
Such market conditions are likely to continue
into 2018, as President Xi Jinping hasreiterated that China will continue to reduce
systemic risks in the financial system.
However, it is expected that green bondissuance will be relatively less affected, inpart due to the strong policy support fromthe Chinese government.11

China’s green bonds that are not alignedwith international green definitions

One green factor that may also have contributed
to the slowdown was that the proceeds raised

Reasons

No. bonds

AmountDifferences in green eligibility definitions

31

USD8.7bn(RMB58.8bn)>5% of proceeds allocated to working capital

18

USD4bn(RMB25.5bn)

Lack of disclosure

15

USD1.5bn(RMB10bn)

Alignment with international green definitions
A further USD14.2bn (RMB94.3bn)
green bonds were not in line withinternational green definitions due todifferences between the eligibility of green
projects under China’s domestic guidelines
vs under international definitions.
Project types that are considered green
by domestic but not by international
investors include: retrofits of fossil fuelpower stations, clean coal and coal
efficiency improvements, electricity gridtransmission infrastructure that carries
fossil fuel energy, large new hydro projects(>50MW) and landfill waste disposal, etc.
Further, international guidelines statethat all proceeds should be linked togreen assets or projects – we use a 95%
threshold given that there are costs
relating to the issuance process. However,China’s National Development and Reform
Commission (NDRC) guidelines allow
issuers to use up to 50% of proceeds torepay bank loans or invest in general working
capital. In 2017, USD2.7bn (RMB18bn) of
bonds considered as green by NDRC failed tomeet the 95% threshold. Lastly, green bonds
without a clear disclosure on the intended
allocation of proceeds are not considered as
green until information is available.
Examples of excluded bonds:
Bonds with proceeds going to general
working capital. It includes a bond that
finance for electric vehicle charging stations
and the development of geothermal power
for residential heat supply. While bothprojects are clearly in line with Climate
Bonds Taxonomy and other international
green definitions, the bond was excluded
as 35% of proceeds to be allocated to theissuer’s general working capital.
Bonds with proceeds going to fossil fuelassets commonly include the financing
of a type of coal efficiency projects where

4 China Green Bond Market Annual Report 2017a collection of small coal fired stations
are replaced with a single large one.
Although such projects can utilize coalmore efficiently, they are not in line withthe steep emissions trajectory required tokeep global warming within 2° C.
China is working to harmonise local
green bond guidelines with those ofinternational markets. In March 2017,
People’s Bank of China (PBoC) andthe European Investment Bank (EIB)
launched a joint initiative to develop a
clear framework for analysis and decisionmaking in green finance. In November
2017, China’s Green Finance Committee,
which operates under the PBoC, and theEIB launched a White Paper that provides
an international comparison of several
green bond standards, paving the wayfor enhancing the consistency of green
finance definitions and standards between
China and the EU.

Onshore market dominates the green bond issuanceGreen Panda Bond <1%

trade financing. Since EXIM Bank’s debut
green bond came to the market in 2016,
all three of China’s policy banks haveissued green bonds, totalling USD5.4bn(RMB36.1bn) in 2017. This is a significant
increase from 4% in 2016 to 14% in 2017.
China Development Bank’s offshore issuancereceived certification from Climate Bonds
Initiative. Agricultural Development Bankof China and EXIM Bank issued their green
bonds under the Bond Connect scheme (seepage 8).

Shenzhen 3%

Shanghai
10%

Offshore18%

Onshore82%% of the total

Interbank Market
69%* by amount issued

82% of bonds were issued on the onshore
market, of which the interbank market
accounted for 69%. This is in contrast to theoverall bond market in China where over 90%
is issued on the interbank market. China’s
onshore bond market is primarily composedof the interbank bond market and two stock
exchange markets, the Shanghai Stock
Exchange and the Shenzhen Stock Exchange.
It is worth noting that China Development
Bank also issued China’s first retail green bondover the bank counter. In China, the interbank
market is under the governance of PBoC anddominated by commercial banks and otherfinancial institutions while the exchange
market primarily consists of listed and nonlisted corporate issuers.

Agricultural Development Bank of
China provides funds for agriculturaldevelopment projects in rural areas; theChina Development Bank specializes ininfrastructure financing, and Export-Import
Bank of China (EXIM Bank) specializes in

Offshore bond issuance helps issuers attract
foreign investors and raise money overseas.
Offshore green bond issuance in 2017
reached USD6.6bn (RMB44.1bn), accountingfor 18% of the total. Large commercial andpolicy banks, such as the Bank of China,
Industrial and Commercial Bank of China,
and China Development Bank fuelled theincrease of offshore issuance in 2017. Most
offshore green bonds were listed on multiple
exchanges with European exchanges being
clear favourites for Chinese issuers -such as
Luxembourg, Frankfurt, Dublin and Euronext’s
platform. 69% of offshore issuance wasdenominated in EUR while 28% was in USD.

2017

Chinese issuer types are becoming morediverse. Even though financial institutions
still account for the largest proportion (47%)
of 2017 issuance, this is down from 73% in
2016. While the largest commercial banks
have become regular issuers, more local
and regional commercial banks issued theirinaugural green bonds in 2017, such as Bank ofBeijing, Bank of Dongguan and Bank of Yantai.
Policy banks, as a special sub-category in
China’s Banking System, play an importantrole in financing for state governmentdirected projects and spending.

The proportion of green ABS issuance intotal tripled - increasing from 1.7% in 2016
to 5.9% in 2017. Issuers included Wuhan
Metro (metro rail), Guiyang Public TransportCompany (new energy buses), TGOOD(Electric vehicles charging stations), etc.
Harvest Capital Management and CECEP
Group, also brought the first green CMBS
to China’s market. The underlying asset is
an office building owned by China Energy
Conservation and Environmental Protection(CECEP) Group. The building received boththe LEED Gold certificate and China Green
Building Label (GBL) two-star certificate.

Commercial banks are still
the largest source of green
bond issuanceGreen bonds from government-backed
issuers have the longest average tenor of
10.8 years. Green bonds have the potential
to be a valuable tool to increase the flowof long-term financing required for green
infrastructure. The average term of bankloans in China is only two years - far shy
what is required to finance longer term green
infrastructure projects. Ma Jun, Special
Advisor to PBoC Governor and Chairmanof China’s Green Finance Committee, says
green bonds would be the best solution fortackling the problem of maturity mismatch.12

Corporate

ABS

Commercial 14%
Bank
Governmentand other financial
backedinstitutions
2% 4%Policy Bank

15%

6%

1% 4% 2%
10% 20%2016

At the moment, the average green bond tenor
is still shorter than the international market
with 59% of bonds having tenors shorter than
5 years compared to the international green
bond market where the majority of bonds has
a tenor between 5 and 10 years.

73% 47%22%* by amount issued

59% of the market is composedof bonds with <5 years tenor>10 years
5%

Some issuer types are able to attract longer
tenors. These include government-backed
entities such as local government funding
vehicles (LGFV) and metro companies where
investment horizons are longer.

Average green bond tenor
Type of issuer

5-10 years
36%<5 years
59%

Average tenor

Commercial Bank and4.6 years
other financial institutions
Corporate

6.3 years

Government-backed

10.8 years

Policy Bank

5.1 years* by amount issued

China Green Bond Market Annual Report 2017 5

Investment grade green bonds dominate theuniverse with most bonds rated by local rating
agencies. 17% of bonds have no rating, but of this
14% was issued by China Development Bankor Agricultural Development Bank of China.
Although some of their bonds didn’t carry any
ratings, they are normally considered equivalent
to the China sovereign rating (S&P A+ or
Moody’s A1). Other green bonds were all rated
as A- or above with 51% of bonds having adomestic rating of AAA. From an international
perspective, issuers do not generally receivea higher rating than that of the sovereign,
meaning that bonds with a domestic
AAA rating would be considered to be A+/A1(China’s sovereign rating). Almost all onshore
issuance carries ratings from local agencies,
this is partly due to the fact that China’s
credit rating market is not opened to foreign
agencies yet. Almost all offshore issuanceuses international rating agencies.
In July 2017, China promised to allow US creditrating agencies to enter its domestic market tohelp draw foreign investment into the country’s
onshore bond market. However, before US rating
agencies can begin operating in China, they
will need to wait for specific rules on how toapply for a ratings license. It is expected that
more local green bond issuers may want
to seek for international ratings to attract
foreign investors. 13
The Big-4 accounting firms dominate
the external review of green bonds with
58% of the total value of green bonds
received an external review from either EY,
Deloitte, KPMG, or PWC. 24% is made up
of reviews from China’s domestic reviewers
which include a variety of agencies, ranging
from specialised green bond reviewers toconventional rating agencies and businessconsultancies. Zhongcai Green Financing
was the largest domestic green bondreviewer (by value) in 2017. 19% of green
bonds don’t have any external review these are primarily composed of private
placements, ABS issuance and some bonds
approved by NDRC as its green bondguidelines don’t require an external review.
Clean energy accounts for the largest allocationof green bond proceeds standing at USD6.8bn(30%) with wind and solar the dominantthemes against Climate Bonds Taxonomy.
Commercial banks are the largest sourceof clean energy financing followed by anincreasing number of corporate issuers such
as GCL Solar and Century Concord Wind
Power. China Three Gorges also came tomarket with two green bonds exclusively
financing for wind farms.
Low carbon transport is the second largest
theme by Climate Bonds Taxonomy, accountingfor 22% of proceeds raised. However,

The Big-4 account for more thanhalf of external reviews

Use of proceeds, by PBoC’s Green
Bond Endorsed Project Catalogue

CICERO 3%
CCXI 3%
Syntao Green Finance 1%
BV 1%
Lianhe Equator 1%

Ecological Protection andClimate Change Adaptation 13%
General use or refinancing 7%
EnergyN.A
Saving3%
7% Pollution
Prevention
and Control
19%

N.A
19%

KPMG 3%

Total issuancefrom China

EY
35%

Clean Energy
27%

PWC
Deloitte
10%10%Zhongcai Green Financing 6%
CECEP 4%China Credit Rating 4%

AAA rated bonds dominate thegreen bond issuance from China
None(policy banks)
14%
None 3%A
13%

Total issuancefrom China

AAA
51%

* by amount issued

by PBoC’s Green Bond Endorsed Project
Catalogue, Pollution Prevention and Control
is the second largest theme. China has madestrong statements on reducing air pollution andhas contributed to the development of clean
energy and pollution prevention projects.14
However, 1/3 of these two themes were notaligned with international definitions, consisting
mainly of projects relating to clean coal suchas ‘coal gasification’ and ‘replacing the smalls
coal fired power stations with the large ones’.
While clean coal technology is recognised in
the Chinese context to reduce pollutants andimprove local air quality, international investors
expect to see a more rapid transition towards 2
degrees target and many of them have divested
from coal over climate change.

Hong Kong domiciled entities have brought
another USD1.36bn green bond to the market,
these include repeat issuers such as the city’s
subway operator MTR, as well as Towngas,
who has finance for non-fossil fuel based
projects through its green bond issuance.

Clean
Transport
16%

Resource Conservation andRecycling 8%

Use of proceeds, by Climate
Bonds Taxonomy
Agriculture, Forestry & Land Use 2%
Adaptation
10%
Waste
Management
11%

Energy30%

Bonds aligned withinternational definitions

Water
18%

AA
19%

6 China Green Bond Market Annual Report 2017

Total issuancefrom China

Energy Efficiency
or Low Carbon
Buildings 7%
Low Carbon
Transport
22%* by amount issued

In the Hong Kong Chief Executive’s 2017 Policy
Address, it was noted that the Hong Kong SAR
government will take the lead in arranging theissuance of a green bond in the next financial year
and promote the establishment of green bondcertification schemes that meet international
standards by local entities. We expect to see
more issuance from Hong Kong in 2018.

Green Bond Prices Varied
After excluding green asset-backed
securities, private placement, new tap andoffshore issuance, there were 90 green
bonds in 2017 selected and comparedwith the yield to maturity of plain vanillabonds having the same ratings, tenor andtype. Among these, 55 green bonds werepriced higher than that of the plain vanillabonds; whereas the other 35 green bonds
were issued at lower cost than that ofplain vanilla bonds.

Given that BRI investments in theinitial years focus on infrastructures,the development could provide huge
opportunities for the green bondmarket. This is because the mobilisationof finance for green BRI projects will be
the next critical step, while green bonds
are the tool to enable this to happen.

% of Not certified

100
75
50
25

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The greening of BRI is essential
because both of its reach and scale:over RMB800bn (USD126bn) has
been committed to BRI projects in the
coming years by Chinese government
and financial institutions.

Certification is increasingly being adopted
in major green bond markets. Globally,
USD22.3bn green bonds was certified in2017, accounting for 14% of the market.

Si

The Guidance stresses the need for
BRI investment in low carbon andclimate resilient infrastructure
projects as an effort to develop the
global green economy, to reduce
environmental risks that infrastructure
projects are exposed to and to protect
the ecosystem.

% of Climate Bonds Certified

ce

In May 2017, President Xi proposed
the establishment of an international
coalition for green development on Beltand Road. This was coupled with the‘Guidance on Promoting Green Belt andRoad’ jointly issued by four Ministries.15

bonds from Industrial and Commercial Bank of
China, China Development Bank and Bank of
China also received Certifications in 2017. Certified
Climate Bonds made up almost 16% of total green
bond issuance from China (or 26% of internationalaligned green bonds from China) in 2017.

Percentage of market with Climate Bonds Certification in 2017

Ca

Green opportunities along
the Belt and RoadIn June 2017, China Three Gorges became the first
Chinese issuer to gain Climate Bonds Certification
for a bond financing wind power projects. GreenFran

The Climate Bonds Standard (CBS) provides
clear, sector-specific eligibility criteria for
assets and projects to define project eligibility
for green bonds and to help investors makeinformed decisions about the climate andenvironmental credentials of a bond.

The Certification scheme allows Chinese
issuers to demonstrate to overseas investors
that their bond meets international industry
standards for climate and environmental
integrity. It also makes it easier for international
investors to identify and invest in quality green
bonds, reducing the need for due diligence.

% Climate Bonds Certified(by value)

Certified Climate Bond issuance ison the rise. Confidence in the green
credentials of green bonds is essential
to a sustainable market.

* by interntional-aligned bonds

Case study: ICBC’s One Belt One Road Climate BondICBC issued its first certified Climate Bondfor USD2.15bn, issued in three tranches of
EUR1.1bn, USD450m and USD400m with
3 and 5-year tenors. The ICBC statement
notes that the ‘One Belt One Road Green
Climate Bond’ marks the biggest single
tranche in EUR-denominated green bonds
by a Chinese issuer.
European investors took over 70% in two
3-year tranches in EUR and USD, witha diversity of investors including ESG

investors, sovereign funds, insurancecompanies and corporates.
Bond proceeds will be used for eligible
projects, including renewable energy, lowcarbon transportation, energy efficiency,
and sustainable water, etc. This is the firstclimate bond from China that received
both an external review and the Climate
Bonds Certification against domestic andinternational definitons respectively.

Chinese green bonds certified by Climate Bonds Initiative
IssuerAmountCurrency

Issue Date

Maturity Date

Verifier

MarketChina Three Gorges

650m

EUR

21/06/2017

21/06/2024

EY

DublinIndustrial andCommercial Bank of
China

450m

USD

12/10/2017

12/10/2020

Luxembourg Stock Exchange

400m

USD

12/10/2017

12/10/2022

1.1bn

EUR

12/10/2017

12/10/2020

CICERO/
Zhongcai
Green
Financing

1bn

EUR

16/11/2017

16/11/2021

500m

USD

16/11/2017

16/11/2022

500m

USD

22/11/2017

22/11/2022

1bn

CNY

22/11/2017

22/11/2020

700m

EUR

22/11/2017

22/11/2020

China Development
Bank
Bank of China(Luxembourg Green
Exchange)

EY (all)

China Europe International
Exchange, Hong Kong

EY (all)Euronext-Paris

China Green Bond Market Annual Report 2017 7

2017 firsts and emerging trends
China firsts in 2017:

Emerging Trends:

1. First certified Climate Bond

1. Bonds issued by Local
Government Financing Vehicles
are on the rise

The first Chinese green bond certified
by Climate Bonds Initiative was issuedin June 2017 by China Three Gorges
Group. It was the Group’s first offshore
green bond amounting to EUR650m. Funds
will be allocated to two wind power
projects in Germany and Portugal witha combined installed capacity of 710MW.
It attracted investors from several
countries around the world and was
3.1 times oversubscribed.
China Three Gorges Corp. is the largest
hydropower enterprise in the world interms of installed capacity. In spite ofcontroversies over hydro projects, thecompany is also ‘making efforts to take thelead in wind power, solar power, and otherforms of clean energy’. While bonds linked
to its hydropower plants are not able tobe certified at present, it can finance thedevelopment of other renewable energy
assets using the Climate Bonds Certification
tool to issue bonds overseas.

2. First green retail bond
The first retail green bond was issued in
September 2017 by China Development
Bank on the interbank bond market. It
finances for ‘Water Resources protection
along the Yangtze river economic zone’.
Industrial and Commercial Bank of China,
Agricultural Bank of China and Bank of
China, as the retail bond distributers, soldthis green bond to both individual investors
and non-financial institutional investors
over the counter.

3. First green bond issued
through Bond Connect
Agricultural Development Bank of China
issued RMB3bn (USD450m) green bondthrough the Bond Connect Scheme for the
first time. It was 4.38 times oversubscribed.
The Bond Connect scheme provides aconvenient channel for foreign investors
to invest in China’s onshore market byremoving some investment hurdles. For
instance, under the Bond Connect, there
is no quota or the need to stipulate an
intended investment amount, trading istherefore more efficient. Overseas investors
can also trade directly with eligible onshore
dealers through electronic request-forquote and native interfaces of establishedelectronic bond trading platforms.

Green bonds issued by Local Government
Financing Vehicles (LGFV) were a newfeature of 2017 reaching USD 3.7bn(RMB24.8bn), making up 10% of 2017 total
green bond issuance from China (less than
1% in 2016). Among the 15 LGFV green
bond issuers, Wuhan Metro is the largest
with a total amount of USD746m(RMB5bn),
followed by Guangzhou Development
Group(USD367mn/RMB2.4bn).
The largest climate theme financed by LGFV
green bonds was low carbon transportation,
this includes Wuhan Metro’s issuance (inmultiple taps) for the city’s mega metro
projects and Xi’an Fengxi New City’s green
bond raising funds for the electric vehicle
charger stations. The second largest theme
was adaptation which primarily relates towater infrastructure - for example, Yiwu State
Owned Asset Co. issued a green bond forflood control projects in the city.
What is a local government financing vehicle?
An LGFV is an entity usually set up by local
government authorities or municipalities andserves as a special purpose entity to financeinfrastructure projects. LGFV debt issuancein China has been further accelerated since2014 when the new Budget Law of People’s
Republic of China was released. The Law
allows local government to borrow without
the approval of central government. Althoughalmost all LGFVs are registered as corporates
in China, they normally do not seek to makeprofit but provide ‘off budget’ solutions for the
local government authorities or municipalities.
‘Enterprise bonds’ are the most common
type of instrument used by LGFVs, as
most LGFVs are solely controlled by thegovernment. An ‘enterprise bond’ is aterm unique to the Chinese context thatspecifically refers to bonds issued bycentral government agencies, state-owned
enterprises or state-controlled entities. The
creditworthiness of the financing vehicles,
being backed by government authorities inthis kind of structure, is usually enhanced
and therefore the cost of borrowing is lower
compared to regular corporate borrowers.
NDRC, as the regulator of enterprise bonds,
oversees most green bond issuance fromLGFVs. As NDRC allows up to 50% of bondproceeds to be directed to repaying bank

8 China Green Bond Market Annual Report 2017loans or investing in general working capital,
almost 90% of green bonds issued by LGFVs
are not aligned with international definitions.
We expect to see increased issuance fromLGFVs in the coming year, particularly
given the State Council’s announcementof the green finance pilot zones, although
inclusion in Climare Bonds data will remain achallenge due to NDRC guidelines.

Bond Connect Scheme
Bond Connect is a new market access
scheme that allows investors frommainland China and overseas totrade in each other’s bond markets
through a connection between therelated Mainland and Hong Kong
financial infrastructure institutions.
Northbound trading allows overseas
investors to invest in the China
interbank bond market through mutual
access arrangements in respect oftrading, custody and settlement,
this commenced on 3rd July 2017.
Southbound trading will allow China’s
domestic investors to have easieraccess to foreign bond markets – thiswill be explored at a later stage.
In 2017, both the Agricultural Development
Bank of China and Export-Import Bankof China launched green bonds throughBond Connect scheme. We expect more
Chinese issuers to follow suit.
Some foreign investors currently haveaccess to the onshore bond market
under China Inter-Bank Bond Market(CIBM), QFII and RQFII schemes.
However, Bond Connect could be abreakthrough as it overcomes a few
hurdles of these schemes such as that:a) there is no quota or need to specify
an intended investment amount; b)investors can trade bonds directly witheligible onshore dealers without having
to engage an onshore bond settlement
agent bank; c) CNH (offshore RMB) andother foreign currencies are acceptedfor payment under Bond Connect .16
In short, Bond Connect provides foreign
investors with a much more convenientchannel to participate in the domestic
bond market and leverages on Hong
Kong’s experience in RMB business andserves to test the further liberalisationof China’s capital markets and theinternationalization of RMB.

2.A broad range of green bondindices are appearing
A green bond index tracks the financial
performance of the constituents andhelps investors to identify fixed income
investments supporting a low carbon
transition. As China’s green bond market has
grown, a number of green bond and climatealigned bond indices have been established,focusing on both labelled and unlabelledgreen bonds on China’s domestic market.
These indices make it easier for investors to
track green bond performance, and compare
returns and volatility with other investments.
Existing indices have been launched by avariety of institutions, including the bondmarket custodian, stock exchanges andinternational organisations.
After the release of ChinaBond China Green
Bond and Select Green Bond Indices, andthe ChinaBond China Climate-aligned Bond
Index in 2016, three new green bond indiceswere launched in 2017, these include:a) ChinaBond CIB Green Bond Index
launched jointly by CCDC and China
Industrial Bank.

and Europe and aim to facilitate access togreen bond investment for European investors.
c) SSE Green Corporate Bond Index aims toprovide greater transparency and facilitate
access to Chinese green securities forinvestors in Europe17.

Eligible projects have to meet either theGreen Bond Endorsed Project Catalogue,
NDRC Guidelines, Green Bond Principles,
Climate Bonds Standards, and need to be
confirmed by the China Industrial Bank
according to it’s Green Finance Criteria(2016).

As part of a cross-border cooperation
between Shanghai Stock Exchange (SSE) andLuxSE, the indices will be displayed on bothexchanges’ websites18.

In June 2017, China Industrial Bank released
an index-linked wealth management producttracking the this index, which is the first of
this kind in China.
b) CUFE-CNI Green Bond Index Series weredeveloped by the International Instituteof Green Finance at Central University of
Finance and Economics, and Shenzhen
Securities Information Co., Ltd (SSI) which isa subsidiary of Shenzhen Stock Exchange.
Jointly launched by the Luxembourg Stock
Exchange and Shenzhen Stock Exchange, theindices synchronously display quotes in China

With the development of green bondindices, it is expected that China’s market
will launch green bond ETFs or more indexlinked structured products in the coming
years, which will further promote investment
and liquidity.

Want to know more about
how green bond indices have
performed?
Please see page 12

China green bond and climate-aligned bond indicesName of Index

Index
ProvidersLabelled/
Unlabelled

Eligibility criteria

Type of bonds

Displaying

ChinaBond China
Green Bond Index /Select Green Bond
Index

CCDC

Labelled andunlabelled

Green Bond
Endorsed Project
Catalogue, NDRC
Guidelines, GBP, CBS

Green financial bond, policy
bank bond, corporate bond,enterprise bond, mediumterm note(MTN), etc.

ChinaBond Integrated
Operation Channel

ChinaBond China
Climate-aligned
Bond Index

CCDC, CBI
and CECEP

Labelled green
Green Bondbond, Unlabelled Endorsed Projectclimate-aligned
Catalogue and CBS
bond

Green financial bond, policy
bank bond, corporate bond,enterprise bond, mediumterm note, etc.

ChinaBond Integrated
Operation Channel

ChinaBond CIB
Green Bond Index

CCDC

Labelled andunlabelled

Either Green Bond
Endorsed Project
Catalogue, NDRC
Guidelines, GBP,
CBS, and need tobe confirmed by
CIB’s Green FinanceCriteria (2016)

Green financial bond, policy
bank bond, corporate bond,enterprise bond, mediumterm note, etc.

ChinaBond Integrated
Operation Channel

CUFE-CNI Green
Bond Index Series

SSI, IIGF

Labelled andunlabelled

Green Bond
Endorsed Project
Catalogue

Bonds issued by government,
policy banks and government
backed agencies; bonds
issued by AAA-rated financial
and nonfinancial companies
are also eligible, including
bonds issued by listedcompaneis, enterprise bonds,
MTN, commercial paper, etc.

LuxSE, Shenzhen
Stock Exchange

SSE Green Corporate
Bond Index

SSE

Labelled

CSRC green bondguidelines, and the
SSE’s green bondpilot programme

Corporate bonds listed
on SSE, excluding private
placement bondLuxSE, Shanghai
Stock Exchange

China Green Bond Market Annual Report 2017 92017 green bond policy roundup2017 has seen Chinese green bond market
expansion bolstered by a string of policies atboth central and local government levels:

Green financeis taking centre
stage in policy
discussions
1. The 19th National Congress emphasizes
the promotion of green development.
The National Congress is held every 5 years
and is important because it outlines thevision of the Party Leader and defines theambitions of the Communist Party for the
next 5 years. President Xi Jinping’s reportat the 19th Chinese Communist Party
National Congress in October 2017 madeit clear that China will implement strict
systems for environmental protection,
develop Eco-friendly growth models, andwork together to combat climate change. He
also asserted that China will step up efforts
to establish a legal and policy frameworkthat promotes green production andconsumption, and promotes an economic
structure that facilitates green and lowcarbon development. There are also plans
for China to create a market-based system
for green technology innovation, develop
green finance, and spur the development ofenergy-saving and environmental protectionindustries as well as clean production andclean energy industries.
2. The Fifth National Financial Work
Conference encourages the development ofgreen finance.
Held every five years since 1997, the National
Financial Work Conference sets the scene
for macro financial policies and financial
system reforms in China. Chinese President
Xi Jinping attended the 2017 conference anddelivered the keynote speech. He stressedthat the financial sector is the facilitatorof the real economy and that China needs
to build an inclusive financial system, andencourage the development of green finance.
3. The Government Work Report includes
green finance
In March 2017, Chinese Prime Minister Li
Keqiang presented the 2017 Government Work
Report at 12th National People’s Congress
where he stressed that the Xi administration
will continue to make major efforts todevelop green finance. This report is released
every year and highlights the government’s
administrative priorities for the following year–
this is the second time that ‘green finance’

has been being written into the government
work report, indicating a growing emphasis on
greening the financial system.
4. The State Council set up pilot zones infive provinces to promote green finance
In June 2017, the State Council approved theoverall plan for the development of green
finance and innovation pilot zones in fiveprovinces, namely Guangdong, Guizhou,
Jiangxi, Zhejiang and Xinjiang. These pilot
zones will each focus on different aspectsof green financing, including growing green
bond issuance. Various pilot zones haveannounced experimental programs or to-do
lists on developing green loans, green bonds
and green insurance, and have committed
to accelerating the construction of a diverse
green financial system.

Guidelines
are regulating
an increasing
proportion of themarket
1. PBoC and CSRC guidelines for verifiers
In late December, PBoC and CSRC jointly
released ‘Green Bond Assessment andVerification Guidelines’ for green bond verifiersand verification activities in China.19 The new
guidelines will be under the supervision ofa new ‘Green Bonds Standard Committee’,currently in the process of being set-up. It
is the first time that a government introduces
supervisory scheme stipulating the regulatory
requirements for verifiers, including the required
qualifications and credentials, verification
methods, and reporting requirements. Verifiers
should follow either domestic or international
standards recognized by the Green Bonds
Standard Committee, and they will now
have to undertake both pre-issuance
verification and post-issuance tracking.
2. National Association of Financial Market
Institutional Investors (NAFMII) guidelines
The NAFMI guidelines, released in March
2017, cover non-financial enterprises
and are additional to the current suite ofChinese guidelines as such entities were notpreviously covered by other guidelines.
According to the guidelines, NAFMII will opena ‘green channel’ for the registration of green
debt financing instruments and strengthen theregistration service for green debt financing
instruments. The guidelines require thatgreen debt financing instruments shouldhave a reasonable assessment and selection
mechanism for green projects, set up a special
account for green bond proceeds for regulatory

10 China Green Bond Market Annual Report 2017

purposes, and raise funds specifically for green
projects. In addition, the guidelines come withan information disclosure form, which sets out
requirements for disclosure on all risks, useof proceeds, management of proceeds andinformation disclosure arrangements. They also
require issuers to disclose the basic information
about third party verifiers, their evaluation
criteria, methodology, evaluation process andselection.
3. China Securities Regulatory Commission(CSRC) guidelines for listed companies
The CSRC guidelines, released in March 2017,
have adopted the green definitions used by
PBoC, with a restrictive proviso excluding
high polluting and high energy consumption
companies that conflict with the national
industrial planning policy. There are no details
around what the implications of this will be but
it’s possible that companies in high polluting
industries like coal will not be approved to issue
green bonds. The guidelines also encourage
financial institutions including brokerages,
fund management companies and banks toinvest in green bonds, and prompted Shanghai
and Shenzhen stock exchanges to develop
dedicated green bond lists, indices and other
instruments to facilitate investment.

Harmonisationof green bondstandards

One barrier to the growthof the green financemarket and cross-border
capital flows is the lack of comparability andconsistency between green bond standards
in different markets. This has prompted
global efforts towards harmonisation of green
definitions and standards.
Domestically, PBoC and NDRC havepublished green bond guidelines with a listof qualifying green projects and proposals
for policy incentives. While the two sets ofChinese guidelines are complementary, slightdifferences can create confusion in the market.
PBoC and NDRC have reached consensus
to work towards a common Green Bond
Catalogue on the basis of the national Green
Industry Catalogue20 - there is currently no
published time frame on this.
Internationally, PBoC’s Green FinanceCommittee and the EIB launched a white paper
entitled ‘The need for a common languagein Green Finance’ with an international
comparison of green bond standards. The
paper paves the way for better consistency ofgreen definitions and standards between China
and the EU.21

Things to watch for in China in 20182017 was a year of strong growth in global
green finance but there is a long way to go.
Climate Bonds Initiative and the United
Nations Framework Convention on Climate
Change (UNFCCC)22 have both stated that to
make a meaningful contribution to climate
finance, green bond issuance should reach
USD1tn per year by 2020 .23
As one of the world’s largest builders ofgreen infrastructure and one of the largest
green bond markets, China will account for a
big slice of the USD1tn pie. This will require
the green bond issuance in China to growtenfold in just three years. The following
catalysts may make this happen.

1. A greener Beltand Road Initiative
In May 2017, China held
the first-ever Belt andRoad Summit in Beijing at which China
demonstrated its ambition to green the Beltand Road Initiative to include renewableenergy and other green infrastructure.24
While initial BRI plans were for more
traditional infrastructure (fossil fuels, roadsetc.), the statements about greening the BRI
is a positive step.
The overarching challenge ahead is to fill thehuge infrastructure funding gap. According to
Asian Development Bank (ADB), USD22.6tn
is required in Asia and the Pacific alone tomeet all infrastructure needs through to2030.25 China and the international financecommunity will be key to mobilising private
investment in countries along the Belt andRoad and green bonds will be a crucial tool.
We have already seen major banks including
China Development Bank, ICBC and Bank of
China issuing green bonds to support green
infrastructure in countries along the Belt andRoad. A lot more Belt and Road green bonds
are expected to come in 2018 and beyond.

2. Increasing green
sovereign and subsovereign issuanceto implement infrastructure plans in linewith Nationally Determined Contributions(NDCs). Besides raising capital, a sovereign
green bond can attract new investors,
improve collaboration between financeministries and provide policy certainty within
the country. This is a possibility in China
although in the short term, an increase in
sub-sovereign bond issuance is more likely.
China’s green bond market saw plenty of
new entrants from the local government levelin 2017. This is likely to increase in 2018 as
the five green finance pilot zones implement
their plans approved by the State Council,
and other local government entities will also
use approved quota to issue green bonds tofund their green projects (page 13).

3. Inter-country
capital flows will
support green bondmarket growth
Despite China being the world’s third largest
bond market behind USA and Japan, only 4%of the bonds are foreign-owned in China. This
compares to 10% in Japan and 43% in the
US.26 Cross-border capital flows to China’s
green bond market are important to its growth
but are currently hamstrung by a number ofboth green and non-green factors.
Green factors include differences between
China and international green definitions anda lack of information on China’s green bondmarket. Non-green factors include regulatory
controls in place for domestic market access,capital flow controls, inadequate hedging tools
and unfamiliarity on the part of international
investors with domestic credit ratings.27
Already, there is momentum underway to
reduce barriers to international access toChinese markets and, as this continues (seebox) there will be a larger market for Chinese
green bonds.

4. Green Bond Connect

2017 saw increased
issuance of sovereign green bonds
globally, with France, Fiji and Nigeria being
the pioneers. In November 2017, China
Development Bank, the state-owned policy
lender, debuted its Certified Climate Bond on
the offshore market - China’s first ever quasisovereign international Climate Bond.

Currently, all green bonds on onshore
secondary bond markets are tradable underthe Bond Connect Scheme. For new issuance,
Agricultural Development Bank of China andExport-Import Bank of China took the leadby launching primary green bond offerings
through Bond Connect scheme in 2017. We
expect there will be a growing number ofChinese green bond issuers to follow suit as
they look to diversify their investor base.

Green sovereign bonds are increasingly seen
as a key tool for governments to raise capital

Bridging the difference between the China
and international green definitions, as wellas increasing the visibility of green bonds byproviding dedicated green bond segment on
stock exchange remain crucial in boosting
foreign investor confidence, and in increasing
green bond trading volume and capital flows.

5. Hong Kong green bonds
Hong Kong is also stepping up efforts
to catch up with the green financedevelopments in the region. This is evident
by the leading role that the Hong Kong
government has played in support of green
bond market and green bond certification
scheme against clear and transparent
criteria. Continuing discussions on green
bonds at government, regulatory and market
levels will help to establish Hong Kong as
an international green finance centre andstrengthening the city’s role as a superconnector between mainland China and therest of the world.

Actions to facilitate intercountry capital flows
To pave the way for introducing overseas
capital to China’s green bond market, thefollowing actions are recommended:
For regulators:• Simplify the green bond approval
process• Provide clear policy guidance onmarket entry channels• Improve requirements for domestic
credit ratings• Provide clear policy signals andguidance on international capital
controls
For financial institutions andgovernment entities• Raise awareness throughdemonstration issuance• Develop RMB hedging instruments
For institutes and other service
providers• Improve international investor
understanding of local market
through investor roadshows orengagement platforms• Develop essential market
infrastructure such as databases
and indices• Support the establishment ofinternationally-accepted green bondstandards and certification schemes.

China Green Bond Market Annual Report 2017 112017 detailed charts and data: index performance
ChinaBond China Climate-aligned Bond Index

ChinaBond China Green Bond Index

As of 31 December 2017, there were 268 constituent bonds
included in the ChinaBond China Climate-aligned Bond Index
with a total outstanding amount of RMB 1.3tn. The average
duration is 4.5 years and the 1-year total return of the index was-0.59%. 99.99% of the proceeds of index constituents wereallocated to green projects.

As of 31 December 2017, there were 755 constituent bonds
included in the ChinaBond China Green Bond Index with a total
outstanding amount of RMB 2.45tn. The average duration is3.95 years and the 1-year total return of the index was 0.11%.
93.65% of the proceeds of index constituents were allocated togreen projects.

Total return: Chinabond China
Climate-aligned Bond Index

Total return: ChinaBond China
Green Bond Index
150

140

130

130
Total return Index (Total value)

140

90

Jan-2010 2011 2012 2013 2014 2015 2016 2017 2018

Jan-2010 2011 2012 2013 2014 2015 2016 2017 2018

ChinaBond China Green Bond Select Index

ChinaBond CIB Green Bond Index

As of 31 December 2017, there were 623 constituent bonds
included in the ChinaBond China Green Bond Select Index
with a total outstanding amount of RMB 2.25tn. The average
duration is 4.08 years and the 1-year total return of the index
was -0.05%. 94.65% of the proceeds of index constituents wereallocated to green projects.

The index was launched jointly by CCDC and China Industrial Bank.
Eligible projects have to be confirmed by China Industrial Bank’s
Green Finance Criteria (2016).

Total return: Chinabond China Green Bond
Select Index

Total return: ChinaBond CIB Green Bond Index

110
100

120
110
100
90

As of 31 December 2017, there were 95 constituent bonds with a total
outstanding amount of RMB267.5bn. The average duration is 2.35
years and the 1-year total return of the index was 1.43%. 96.11% of theproceeds of index constituents were allocated to green projects.

150

150

140

140

130

130

120
110
100
90

Jan-2010 2011 2012 2013 2014 2015 2016 2017 2018

12 China Green Bond Market Annual Report 2017

120
110
100
90

Jan-2013

2014

2015

2016

2017

2018

Data source: all index performance data is provided by CCDC

120

Total return Index (Total value)

Total return Index (Total value)

Total return Index (Total value)150

2017 detailed charts and data: approved bonds
Approved green bonds in 2017 with remaining quota*
Issuer/potential issuer

Amountapproved

Amountremaining**

Approval
Date

Regulatory
Authority

GCL-POLY Holdings

1.75bn

815m

N.A

SZSE

Shaanxi Xixian Xinqu Fengxi Development and Construction (Group)

1.67bn170m

07/01/17

NDRC

Yunnan Water Investment Co. Ltd.

1.8bn

600m

17/01/17

SSE

Wuhan Metro

5bn

2bn

25/01/17

NDRC

Tibet Urban Development and Investment

1.82bn820m

07/03/17

NDRC

China Power New Energy Development Co. Ltd.

2.5bn

1.7bn

04/17

N.A

Zhongli Group

700m

600m

20/04/17

CSRC

Anhui Tongling Development Investment Group

1.2bn

400m

25/04/17

NDRC

Heilongjiang Quanlin Ecological Agriculture Company

3bn

3bn

11/05/17

NDRC

China Longyuan Power Group

6bn

3bn

15/05/17

NDRC

Changchun City Construction Investment Co. Ltd.

3bn

3bn

16/05/17

NAFMII

Guangzhou Development Group

4.8bn

2.4bn

22/05/17

NDRC

Oriental Energy Co. Ltd.

1.2bn

600m

24/05/17

NAFMII

Huishang Bank

5bn

4bn

06/17

CBRC, PBoC

Bank of Zhengzhou

5bn

2bn

06/06/17

CBRC, PBoC

Qingdao Rural Commercial Bank

4bn

3bn

09/06/17

CBRC, PBoC

Qidi Holdings

1.5bn

1.15bn

07/17

SSE

Risen Energy Co., Ltd.

650m

650m

06/07/17

CSRC

Shanxi International Energy Group2bn

1.52bn07/07/17

CSRC

Bank of Lanzhou

3bn

2bn

11/07/17

CBRC, PBoC

Tian Jin SDIC Jinneng Electric Power Co. Ltd.

1bn

200m

20/07/17

NAFMII

Guangdong Nanhai Rural Commercial Bank

1.5bn

1.2bn

20/07/17

CBRC, PBoC

Zhongmin International Finance Leasing Co. Ltd.

1bn

1bn

09/17

SSE

Bank of Dongguan

4bn

2bn

03/08/17

CBRC, PBoC

Tianjin Union Electronic Technology Co. Ltd.

800m

800m

24/08/17

NAFMII

China Guangdong Nuclear Power Holding Co. Ltd.

2bn

1bn

24/08/17

NAFMII

Shandong Lipeng Co. Ltd.

600m

350m

09/17

SZSE

China Jushi Co. Ltd.

700m

700m

19/09/17

NAFMII

Yantai Bank

4.58bn3.58bn25/09/17

CBRC, PBoC

Anji County Urban Construction Investment Group Co. Ltd.

1bn

1bn

30/09/17

NDRC

Huarong Xiangjiang Bank

3.5bn

2.5bn

01/10/17

CBRC, PBoC

Lingbao State-owned Assets Operation Limited Liability Company

1.3bn

1.3bn

18/10/17

NDRC

Shandong Caoxian Shangdu Investment Co. Ltd.

800m

800m

30/10/17

NDRC

Hebei Iron and Steel Co. Ltd.

700m

700m

10/11/17

NDRC

Guoxuan High-Tech Co. Ltd.

1bn

1bn

15/11/17

NDRC* All figures in RMB, only bonds with public disclosure of information are included.
**Amount remaining: the amount of green bond quota left since the last approval from regulators.

China Green Bond Market Annual Report 2017 13

Approved Green Bonds in 2017 with remaining quota
Issuer/potential issuer

Amountapproved

Amountremaining

Approval
Date

Regulatory
Authority

Shanxi Jincheng Anthracite Coal Mining Group

2bn

2bn

15/11/17

NAFMII

Xinjiang Tianye Group Limited

220m

220m

16/11/17

NAFMIIBank of Hebei

5bn

5bn

01/11/17

CBRC, PBoC

Elion Clean Energy Company Limited

530m

530m

01/11/17

SSE

Yancheng Chengnan New District Development Construction

2bn

2bn

22/11/17

NDRC

Henan Zhongfu Industry Co. Ltd.

900m

900m

01/11/17

SSE

Bank of Kunlun

500m

400m

30/11/17

CBRC, PBoC

China Gezhouba Group Lvyuan Technology. Co. Ltd.

1.2bn

1.2bn

08/12/17

CSRC

Anhui Huangshan Construction Investment Group Co. Ltd.

850m

850m

10/12/17

NDRC

Zhuhai Huafa Multi-Business Development Co. Ltd.

1.5bn

1.5bn

13/12/17

CSRC

China Jinmao Holdings Group Limited

4.4bn

4.4bn

14/12/17

CSRC

Seven associated companies of Huadian Fuxin Energy Company

840m

840m

15/12/17

SSE

Zhejiang Huayou Cobalt Co.,Ltd

700m

700m

01/12/17

SSE

Kong Sun Yongtai Investment Holdings Co., Ltd. - Green ABS

630m

630m

22/12/17

SSE

Chongqing Qianjiang City Construction Investment (Group) Co. Ltd.

2.2bn

2.2bn

22/12/17

SZSE

Jinyuan Cement Co. Ltd.

800m

800m

25/12/17

SZSE

China Jinmao Holdings Group Limited

2.2bn

2.2bn

27/12/17

SSE

Guangdong Guangye Group Co. Ltd.

1.9bn

1.9bn

28/12/17

NDRC

MLS Co. Ltd.

1.5bn

1.5bn

28/12/17

NDRC

Yiwu State-owned Capital Operation Co. Ltd.

1.5bn

700m

N.A

NAFMII

China Three Gorges

20bn

18bn

N.A

NAFMII

Regulatory system of the Chinese bond market
Bond type

Regulatory authority

Green bond related policies

Sovereign bonds

Ministry of Finance

Municipal bonds

Ministry of Finance

Financial bonds

PBoC, CBRC

Credit asset-backed securities

PBoC, CBRC

Non-financial corporate debt financing
instruments (including medium tern notes andshort-term commercial papers)

PBoC, NAFMII

Guidance on Debt Financing Instruments Issuance from
Non-Financial Corporates

Enterprise bonds*

NDRC

NDRC Green Bond Guidelines

Corporate bonds (including exchangeable bonds,
convertible bonds, and perpetual bonds)

CSRC, stock exchanges

Guidelines for Supporting Green Bond Development
Notice on Green Bonds Pilot Program

The People’s Bank of China Announcement No. 39 (2015)

Corporate asset - backed securities*Mostly SOEs
PBoC People’s Bank of China
CBRC China Banking Regulatory Commission
NDRC National Development and Reform Commission

14 China Green Bond Market Annual Report 2017

NAFMII National Association of Financial Market Institutional
Investors (directed by PBoC)
CSRC China Securities Regulatory Commission (*stock exchanges
are regulated by CSRC)

2017 detailed charts and data: LGFVs and verifiers lists
List of Climate Bonds
Initiative approved verifiers
operating in China

Table: Local Government Financing Vehicles green bond issuers
LGFV green bond issuers

Municipality

Province

Nantong Eco & Tech Development Zone

Nantong

JiangsuLiuyang Manu & Development

Liuyang

Hunan

Yiwu State-owned Capital Operation Co.

Yiwu

Zhejiang

Yunnan Water Investment Co. Ltd.

/

YunnanDanyang Investment Group Co. Ltd.

Danyang

Jiangsu

Jingjiang City Investment Co. Ltd.

Jingjiang

Jiangsu

Shaanxi Xixian Xinqu Fengxi Development

Xi’an

Shaanxi

Wuhan Metro

Wuhan

Hubei

Kaifeng City Development Investment

Kaifeng

Henan

Guangzhou Development Group

Guangzhou

Guangdong

Pingxiang Huifeng Investment

Pingxiang

Jiangxi

Yangzhou Construction Investment

YangzhongJiangsu

Zhenjiang Dantu Investment

Zhenjiang

Jiangsu

Anhui Tongling Development Investment

Tongling

Anhui

Tibet Investment/

Tibet Autonomous
Region• Bureau Veritas (BV)
• Ernst & Young (EY)
• KPMG• SynTao Green Finance• Zhongcai Green Financing• China Lianhe Equator• Deloitte• Carbon Care Asia Limited (CCA)• China Quality Certification Centre• Raising Clean-tech Investment
Consulting• China Chengxin International
Credit Rating (CCXI)*Information from the China Banking Regulatory Commission’s local government financing vehicles list

Notes on figures and exchange rates:
All figures are rounded in this report. Exchange rates
may vary throughout the report. Rather than a fixed
rate, the actual exchange rate on each bond’s issuancedate is reflected.

References
1. China Daily. (2017). Full text of Xi Jinping’s report at 19th CPC National Congress. [online]. Available at http://www.chinadaily.com.cn/
china/19thcpcnationalcongress/2017-11/04/content_34115212.htm
2. Bloomberg News. (2017). Xi’s Speech Had 89 Mentions of the‘Environment,’ Just 70 of the ‘Economy’. [Online]. Available athttps://www.bloomberg.com/news/articles/2017-10-18/in-xi-svision-for-china-environment-edges-out-economy
3. Ma, J. (2017). To improve environmental information disclosure.
[Online]. Available at http://finance.sina.com.cn/money/bank/
bank_hydt/20160317/102824447244.shtml
4. It’s the total amount of green bonds from mainland China domiciled
issuers. It includes both green bonds aligned with international definitions
and those not. Green bonds issued by Hong Kong domiciled entities are
not included in the figures due to the market is separately regulated.
5. China Securities Net. (2017). The central bank to disclose detailsof the green finance pilot district in five provinces. [Online]. Available at http://news.cnstock.com/news,bwkx-201706-4090751.htm
6. Liu, Y. (2017). MEP issues the Guidance on Promoting Green Beltand Road with three line ministries. [Online]. Available at https://eng.yidaiyilu.gov.cn/qwyw/rdxw/12484.htm
7. The figure includes green bonds issued on both China’s onshore bondmarket and overseas market by entities domiciled in mainland China.
8. Liu, L. (2017). Is the interest rate in China too high? [Online].
Available at http://www.ftchinese.com/story/001073066
9. Statistics and Analysis Department at People’s Bank of
China. (2017). Aggregate financing to the real economy.
[Online]. Available at http://www.pbc.gov.cn/diaochatongjisi/116219/116319/3245697/3245811/index.html
10. Xin, J. (2018). The big change: equity financing surpassedbond for the first time in the last ten years. [Online]. Available athttps://m.21jingji.com/article/20180113/herald/2a1f10fc5eaffde8c5b0786274848174.html
11. Comments from Zhou Chunsheng, Professor of Finance at
Cheung Kong Graduate School of Business
12. Han, X. (2017). Ma Jun: ‘Europe and China have different
priorities’ on green finance. [Online]. https://www.chinadialogue.
net/article/show/single/en/10166-Ma-Jun-Europe-and-Chinahave-different-priorities-on-green-finance
13. Financial Times. (2016). Foreign investors welcome US credit
agencies to China bond market. [Online]. Available at https://www.
ft.com/content/9361f76c-3c5e-11e7-821a-6027b8a20f23
14. China Daily. (2017). Full text of Xi Jinping’s report at 19th
CPC National Congress. [online]. Available at http://www.
chinadaily.com.cn/china/19thcpcnationalcongress/2017-11/04/
content_34115212.htm
15. Ma, J., Gifford, R., Lan, H., and Mandera, S. (2017). Greening thebelt and road. [Online]. Available at http://greenfinanceinitiative.org/
wp-content/uploads/2017/10/Greening-the-Belt-and-Road-English.pdf
16. Hong Kong Stock Exchange. (2017). Bond Connect: Whatit means and how it works? [Online]. Available at http://www.
hkexgroup.com/Media-Centre/Charles-Li-Direct/2017/Bond-Connect-What-it-means-and-how-it-works?sc_lang=en
17. China Securities Index Co., Ltd. (2017). Methodology of SSE
corporate bond index.
18. Luxembourg Green Exchange. (2017). Composition of the
SSE Index Series. [Online]. Available at https://www.bourse.lu/
sse-green-bond-index
19. People’s Bank of China. (2017). Chinese People’s Bank of China
Securities Regulatory Commission Announcement [2017] No. 20.
20. Caixin News. (2017). PBoC and NDRC agreed to prepare aunified eligible green bond project catalogue. [Online]. Available at
http://finance.caixin.com/2017-06-13/101101146.html
21. EIB. (2017). Joint White Paper by China Green Finance Committee and EIB set to strengthen international Green Bond market.
[Online]. Available at http://www.eib.org/infocentre/press/releases/all/2017/2017-311-joint-white-paper-by-china-green-financecommittee-and-eib-set-to-strengthen-international-green-bondmarket.htm?lang=en
22. UNFCCC.(2017).http://newsroom.unfccc.int/unfccc-newsroom/newinitiative-targets-2020-in-race-to-tackle-dangerous-climate-change
23. Mission 2020. (2018). Investment in climate action is beyond$1 trillion per year and all financial institutions have a disclosed
transition strategy. [Online]. Available at http://www.mission2020.
global/milestones/finance/
24. Liu, X. (2017). UNEP to boost a green Belt and Road Initiative.
[Online]. Available at http://www.chinadaily.com.cn/beltandroadinitiative/2017-05/14/content_29341889.htm
25. Asian Development Bank. (2017). Asia Infrastructure
Needs Exceed $1.7 Trillion Per Year, Double Previous Estimates.
[Online]. Available at https://www.adb.org/news/asia-infrastructure-needs-exceed-17-trillion-year-double-previous-estimates
26. Hong Kong Exchange and Clearing Ltd. (2017). Tapping into china’s domestic bond market an international perspective. [Online].
Available at https://www.hkex.com.hk/-/media/HKEX-Market/
News/Research-Reports/HKEx-Research-Papers/2017/CCEO_
Rpt(CN-bond)-201705_E.pdf?la=en
27. Dai, L., Kidney, S., Wang, Y. (2017). Facilitating cross border capital flows to grow the china green bond market. [Online]. Available
at https://www.climatebonds.net/files/reports/china_intracountry_2017-01d_da_en_28nov17_a4.pdf

China Green Bond Market Annual Report 2017 15

In the past year, China has cemented its position as a
key player in the global green bond market with its issuer
base expanding and diversifying. Much of the growth
can be attributed to successful policy drivers initiated bydifferent regulators as well as an overarching increase inenvironmental issues on the president Xi’s agenda.
This is our second annual China Green Bond Market report,
this year in association with CCDC and supported by HSBC.
This report summarises the key developments that havetaken place during the year, focusing on issuance, policy
development and wider market growth.

2017 Highlights:

Number of bonds: 118
Onshore vs. Offshore issuance:

Total amount issued:
USD37.1bn (RMB 248.6bn)
Offshore: USD6.6bn(RMB44.1bn)

Onshore: 113 bonds

Onshore: USD30.5bn(RMB204.5bn)

Offshore: 5 bonds
Issuancealigned withinternational
green
definitions:
USD22.9bn(RMB154.3bn)
15% of global
marketClimate Bonds Certified
China’s issuance:
USD6.01bn(RMB40.2bn)
Largest issuer:
China Development Bank

This report is available in both English and Chinese on Climate Bonds Initiative website (www.climatebonds.net)
Authors:
Alan Xiangrui Meng, Ivy Lau, Bridget Boulle
Climate Bonds Initiativewith the help from Sen Chen, Xiaoyi Liu, Tianyu Liu,
China Central Depository & Clearing Company
Design: Godfrey Design
Source data from Climate Bonds Initiative, CCDC, Wind, Bloomberg,Thomson Reuters Eikon and other parties. All figures are rounded.

Disclaimer: The information contained in this communication does not constitute investment advice in any form and the Climate Bonds Initiative is
not an investment adviser. Any reference to a financial organisation or debt instrument or investment product is for information purposes only. Links
to external websites are for information purposes only. The Climate Bonds Initiative and other partners accept no responsibility for content on external
websites.The Climate Bonds Initiative and other partners are not endorsing, recommending or advising on the financial merits or otherwise of any
debt instrument or investment product and no information within this communication should be taken as such, nor should any information in thiscommunication be relied upon in making any investment decision. Certification under the Climate Bond Standard only reflects the climate attributesof the use of proceeds of a designated debt instrument. It does not reflect the credit worthiness of the designated debt instrument, nor its compliancewith national or international laws. A decision to invest in anything is solely yours. The Climate Bonds Initiative and other partners accept no liability of
any kind, for any investment an individual or organisation makes, nor for any investment made by third parties on behalf of an individual or organisation,
based in whole or in part on any information contained within this, or any other Climate Bonds Initiative public communication.

© Published in February 2018 jointly by the Climate Bonds Initiative and China Central Depository & Clearing Company (CCDC), supported by HSBC.

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supporter of the Climate Bonds
Initiative in China