The Potential for Scaling Climate Finance in China

China has made significant progress in establishing a green financial system, with green credit and bonds becoming the largest in the world. However, the system remains heavily dominated by public actors, with public sources accounting for 51% of total green finance. To meet its 2015 environmental standards and climate targets, China requires an estimated USD 1.4 trillion in annual investment over the next decade, meaning current finance levels must scale up by at least four times. Key barriers to private capital include a lack of transparency in project pipelines, high search costs for impact investors, and a preference for state-owned enterprises (SOEs) in formal financing channels. The report highlights opportunities in green fintech, such as Ant Forest, and matchmaking platforms like those in Huzhou. It also examines China's outbound finance, noting that half of energy-related investments in Belt and Road Initiative (BRI) countries went to fossil fuels, and suggests implementing mandatory exclusion lists and green standards to decarbonize these flows.

• China's green finance averaged RMB 2.1 trillion (USD 320 billion) annually during 2017/2018, but needs to increase by at least four times to meet estimated needs. Approximately USD 1.4 trillion in annual investment is required over the next decade to meet climate targets and environmental protection standards established in 2015.
• The public sector dominates the climate finance landscape, providing 51% of total green finance. Within this public share, nearly 95% is attributable to policy banks, Central State Owned Enterprises (CSOEs), and other major state-owned banks.
• Private sector contribution is limited and highly concentrated in the solar sector, where private sources provided 70% of the sector total (RMB 301 billion or USD 45 billion).
• Green credit and green bonds are the most successful instruments. By the end of 2019, outstanding green loans from 21 major banks reached RMB 10.6 trillion (USD 1.5 trillion), and the green bond market became the world's largest with RMB 977 billion (USD 140 billion) outstanding.
• Significant barriers hinder the scaling of private climate finance, including high 'search costs' for investors, a lack of transparency in the decision-making of large banks and government funds, and a systemic preference for SOEs and politically connected actors.
• China's outbound energy investments in Belt and Road Initiative (BRI) countries totaled USD 292 billion between 2013-2019, with approximately half (USD 98 billion) allocated to fossil fuel projects.
• Green penetration in China's financial system is low, at approximately 4%, indicating substantial room for growth as capital markets evolve.
• Innovative fintech and matchmaking platforms are emerging to bridge finance gaps. Ant Forest has avoided 7.92 million tons of CO2, while Huzhou's Green Finance One-stop Service Platform has helped over 13,000 SMEs receive more than RMB 160 billion in credit.

APA

Choi, J., & Li, W. (2021). The Potential for Scaling Climate Finance in China. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/02/The-Potential-for-Scaling-Climate-Finance-in-China-1.pdf

Chicago

Choi, June, and Weiting Li. The Potential for Scaling Climate Finance in China. Climate Policy Initiative, 2021. https://www.climatepolicyinitiative.org/wp-content/uploads/2021/02/The-Potential-for-Scaling-Climate-Finance-in-China-1.pdf.

Wikipedia

{{cite report |last1=Choi |first1=June |last2=Li |first2=Weiting |title=The Potential for Scaling Climate Finance in China |publisher=Climate Policy Initiative |date=February 2021 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2021/02/The-Potential-for-Scaling-Climate-Finance-in-China-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{choi2021potential, author = {Choi, June and Li, Weiting}, title = {{The Potential for Scaling Climate Finance in China}}, institution = {Climate Policy Initiative}, year = {2021}, month = feb, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2021/02/The-Potential-for-Scaling-Climate-Finance-in-China-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }