Echoing the central government's "30/60" decarbonisation goal of reaching a carbon peak before 2030 and carbon neutrality before 2060, China attaches great importance to the role of finance in green and low-carbon transition, putting in place a multi-tiered green finance market system, with outstanding green loans and bonds both ranking among the top in the world. Benefiting from “top” government policies and “bottom” local initiatives like the carbon trading market and green finance pilot zones, China has seen rapid development of green industries over the past decade. For instance, China’s BYD overtook Tesla as the world’s best-selling brand of electric vehicles; China’s share of renewable energy capacity—mostly solar, wind and hydro—reached about 50 per cent of its total generation capacity; and the clean energy sector1 contributed 40 per cent to the 2023 growth of China’s GDP.2

In 2023, green finance has been mentioned in several high-level policy documents and by China’s President Xi to support China’s green economic ambitions. Yet progress in policy and green finance application have been mixed. On the policy side, an important development impacting green finance in China was the establishment of the Central Financial Commission (CFC) for financial decision-making, the creation of the National Financial Regulation Administration (NFRA) to replace the China Banking and Insurance Regulatory Commission (CBIRC), the strengthened role of the CSRC in capital market regulation and the streamline of PBoC on monetary policy and macro-prudential supervision. The governance reshuffle might have led to a slower pace of green finance policy advancement in 2023, for example in transition finance standards or sustainable finance disclosure guidelines. Nevertheless, progress was evident in segments like green insurance and carbon markets through the re-introduction of China Certified Emission Reductions (CCER) after a hiatus since 2017 as well as on sub-national level through new pilots and local regulatory advances (e.g., in Shanghai, Shenzhen).

On the application side, the growth of green financial instruments has been mixed: green loans have grown, while green bond issuances have declined (possibly due to stricter standards on the use of proceeds in force since 2023). This brief, building on the previous report analyses the development of China’s green finance policies and tools in 2023 to identify trends and provide recommended actions to further scale green finance in China. It is a snapshot of various developments and uses specific examples to understand trends and directions. It is by no means a complete guide to Chinese green finance and its developments.