CHINA: China’s finance ministry to issue sovereign green bonds in London

China’s finance ministry has announced the impending issuance of sovereign green bonds in London, which will mark its first overseas sale of such bonds and a concrete step following high-level economic and finance talks earlier this year.

The yuan-denominated issuance will be worth up to 6 billion yuan (US$829.75 million) with specific details to be disclosed later, the ministry said on Wednesday, in a step seen as reinforcing its commitment to sustainable development while promoting the yuan’s global use.

The UK-China Economic and Financial Dialogue was co-hosted by Vice-Premier He Lifeng and British Chancellor of the Exchequer Rachel Reeves in January.
Rui Meng, a finance professor at the China Europe International Business School in Shanghai, said the issuance reflected “China’s commitment to green initiatives”, particularly as the Trump administration in the United States retreats from efforts to tackle the effects of climate change.
“European investors also have strong demand for green financial products,” he said. “The issuance also provides a better platform of communication with Europe.”

A statement issued by the Ministry of Finance after the meeting in January said that continued cooperation on sovereign green financing frameworks and China’s inaugural issuance of yuan-denominated sovereign green bonds – a government-issued debt instrument used to raise funds for environmentally sustainable projects – in London were among the key policy outcomes reached by the two sides.

Rui said the issuance in London, a global financial hub, could also expand the yuan’s influence in international markets, while helping to attract more international investors to China’s financial market and bring in advanced green finance expertise.

China has expanded its exploration of green financial products as part of its broader efforts to achieve its goal of peaking carbon emissions before 2030 and reaching carbon neutrality by 2060.

Last month, the finance ministry released a framework document for China’s sovereign green bonds, pledging to “diversify high-quality green bond offerings in the international market and attract global capital to support domestic green and low-carbon development”.

“[The issuance] shows the ongoing push for China to facilitate the yuan’s internationalisation and have a greater say in green initiatives,” said Gary Ng, a senior economist at French investment bank Natixis.

“This area has less geopolitical controversy, and the London issuance can attract more investors beyond the traditional base in Hong Kong.”

But he also noted that the impact of the move would depend on the proportion of the bonds bought by international investors, adding that if they were mainly purchased by Chinese entities, that would have less of an effect in promoting yuan-denominated assets.

Zhao Xijun, a finance professor at Renmin University in Beijing, said that while the bond issuance in London would be relatively small, it carried important symbolic weight.

“It signals China’s willingness to deepen financial cooperation with the UK, and provide stable assets to the global market to help offset rising financial uncertainties caused by the Trump administration,” he said.