Green Finance Under China’s Government Reorganization

(Photo: Germán Vogel/Getty Images)


In an effort to better coordinate pollution control, one of the top three priorities of the Chinese government, President Xi announced a major reorganization of government responsibilities, including elevating and expanding the focus on green finance. The hope is to promote better accountability and coordination across the central government. The latest reorganization occurred following the March 2018 meeting of the National People’s Congress (NPC).

At the top-levels of the national government, the Central Committee on Deepening Reform and the Central Committee on Financial and Economic Affairs retain the responsibility of policy guidance for China’s economic transformation and the development of an “ecological civilization.” Though both are Chinese Communist Party organizations, they will be the drivers of ecological and environmental protection reform. For instance, the newly established Ministry of Ecological Environment (MEE) and Ministry of Natural Resources (MNR), and other cross-cutting administrative policies are examples of the purview of the central leading groups.

Implementation of these high-level directives fall on the shoulders of the various cabinet ministries, in addition to financial regulators, such as, the People’s Bank of China (PBOC), China Securities Regulatory Commission (CSRC), China Banking and Insurance Regulatory Commission (CBIRC), and the Ministry of Finance (MOF). The list of implementing agencies also includes the MEE, MNR, the National Development and Reform Commission (NDRC), and the National Energy Administration (NEA).

The MNR is a new ministry that was formed to manage China’s natural assets and with regard to green finance, its main responsibility is carbon sequestration work, or the removal and storage of carbon from the atmosphere into carbon sinks–forests or oceans/coastal ecosystems–through physical or biological processes. The MEE was formerly the Ministry of Environmental Protection, but was re-named after the NPC, and now has the mandate to continue to build out China’s national carbon market and the function of driving China’s climate change effort. These responsibilities were originally under the NDRC’s scope of responsibilities. The work on energy conservation and circular economy are retained with the NDRC after the shuffle and progress on renewable energies will be housed within National Energy Administration (NEA).

For the financial regulators, the PBOC, CSRC, CBIRC, and MOF all play critical roles for advancing green finance broadly. The PBOC retains responsibilities for the G20 Sustainable Finance Study Group, local green finance pilots, and national green finance standards, policies, and regulations and the CSRC continues to be accountable for green bonds, green funds, green indices, carbon futures, and environmental information disclosures of listed companies. The newly merged CBIRC houses the work on green credit and green insurance. Lastly, MOF is in charge of green public-private partnership projects, the national green development fund, and financial subsidies for green projects. These responsibilities have largely remained intact even after the reshuffle.

China’s reorganization and expansion of its focus on green finance underscores its focus on addressing significant ecological and environmental issues. And its success will be a determinant in implementing President Xi’s goal of addressing the China’s top priority of enhancing ecological and environmental protection and winning the battle against pollution.