Huzhou City/Zhejiang province
Huzhou City, in the eastern province of Zhejiang, used to be known in China for its prosperous textiles industry. Now it is recognized as a hub for green finance thanks to the support of the Zhejiang provincial government.
Last year, 79% of bank loans provided locally were recognized as green credit. By the end of the year, the balance of green credit from banks operating in the city reached Rmb45.5 billion ($6.6 billion), up 69% from a year earlier. These banks also issued up to Rmb20 billion of green bonds for local projects last year.
By subsidizing interest payments of green credit and providing green-loan guarantees for local small and medium-sized companies, Huzhou has also become a hotbed for the development of innovative products such as green credit with carbon credits as collaterals, and green insurance for local agricultural products.
To create a sustainable green financing model for local companies, Huzhou has also led other Chinese cities in establishing a carbon-trading mechanism. Fifteen local industrial companies participated in the trading of carbon credits last year.
Huzhou’s booming green finance has much to do with the strong support it has received from the Zhejiang provincial government.
The government launched an IT system in 2014 to track local companies’ behaviour in complying with environmental rules and regulations. It shares the information with local banks and encourages them to lend to energy-efficient and environmentally friendly companies.
As a sound regulatory framework for green credit is still in the making in China, the government has coordinated local banks to collectively institute a regulatory system. That way they can track the performance of green finance-funded projects and assess associated risks.
Aided by favourable local government policies, the balance of green credit provided by banks in Zhejiang has shown double-digit growth in the past several years, and reached Rmb744 billion by the end of 2016.
Meanwhile, Quzhou, another city in Zhejiang, has won national acclaim for using a wide array of green-finance products, including green credit, green bonds, green investment funds and insurance, to fund the disposal of toxic waste from local chemical plants and waste from local animal husbandry.