Financing the Decarbonisation of China’s Steel Sector

This report examines the financing of China's steel sector decarbonisation, highlighting the impact of Hebei Province's 2023 transition finance guidelines. It finds that while labelled debt (loans and bonds) is growing—with USD2.8bn in Hebei transition loans and USD3bn in labelled bonds in 2024—the sector requires USD18bn in capex over the next five years to meet EAF and H2-DRI targets. The report recommends government incentives, diversified financial products, and proactive corporate transition planning to bridge the funding gap.

• China's steel sector is a major emissions source, accounting for 15% of the country's total carbon emissions, with over 50% of global steel production occurring in China. The industry is heavily reliant on the blast furnace (BF) process, which accounts for more than 90% of production.
• The introduction of the Hebei Province Transition Finance Guidelines for the Iron and Steel Industry in December 2023 served as a catalyst for capital flows. In 2024, steel transition loans in Hebei exceeded CNY20bn (USD2.8bn), and Chinese issuers launched 12 steel-related labelled bonds totaling USD3bn.
• Decarbonising the Chinese steel sector requires significant capital expenditure. Transition Asia estimates a need for at least USD18bn in capex over the next five years, with 41% allocated to H2-DRI-EAF development and 14% to scrap-based EAF transition. Long-term estimates from the Rocky Mountain Institute suggest total fixed asset investments of at least CNY1.6tn (USD220bn) by 2050.

APA

Xu, X., Xie, W., Jin, P., Jin, Z., Muldoon, C., Zuo, B., Jackson, A., & Huleatt, L. (2025). Financing the Decarbonisation of China’s Steel Sector. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/CBI-Financing-the-Decarbonisation-of-China%E2%80%99s-Steel-Sector_EN.pdf

Chicago

Xu, Xiaoyun, Wenhong Xie, Patrick Jin, Zixi Jin, Clodagh Muldoon, Bonnie Zuo, Alastair Jackson, and Lauren Huleatt. Financing the Decarbonisation of China’s Steel Sector. Climate Bonds Initiative, 2025. https://www.climatebonds.net/files/documents/publications/CBI-Financing-the-Decarbonisation-of-China%E2%80%99s-Steel-Sector_EN.pdf.

Wikipedia

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BibTeX

@techreport{xu2025financing, author = {Xu, Xiaoyun and Xie, Wenhong and Jin, Patrick and Jin, Zixi and Muldoon, Clodagh and Zuo, Bonnie and Jackson, Alastair and Huleatt, Lauren}, title = {{Financing the Decarbonisation of China’s Steel Sector}}, institution = {Climate Bonds Initiative}, year = {2025}, month = may, url = {https://www.climatebonds.net/files/documents/publications/CBI-Financing-the-Decarbonisation-of-China%E2%80%99s-Steel-Sector_EN.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }