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China's private sector needs to play major role in green financing

China's private sector needs to play a major role in helping to finance the country's energy transition and green investments, according to a special adviser from the People's Bank of China.

Speaking at a conference on climate finance in Paris on Dec. 11, Ma Jun, who is also chairman of China's Green Finance Committee, said 90% of green financing would have to come from the private sector, with the remaining 10% being funded by the government.

"That is why the financial system has to a play a major role in mobilizing this green financing," he told the conference.

Green financing covers investments and lending in projects such as solar power and wind farms.

"We need lots of money for green investments, in energy transition, in dealing with environmental issues like … land pollution," Ma Jun added, estimating China's green financing needs at $600 billion a year.

He said Chinese authorities had implemented measures to encourage private financing in the green sector, including cheap central-bank lending to commercial banks for green projects. The government has also asked local government to provide subsidies for green projects and to set up local green investment funds.

"All these different mechanisms are designed to lower the funding costs for green projects, which should then bring private-sector participation to these projects," Ma Jun said.

By 2020, all listed companies in China will have to give environmental information on a mandatory basis in a three-step plan, he added. In 2017, major polluters will have to disclose their environmental information; next year, listed companies that do not disclose the required information will have to explain the reason why; and by 2020, all companies will have to fully reveal their environmental information.

"The reason is simple: without information, the market cannot identify who is green and who is not," Ma Jun said.

China launched its domestic green-bond market in 2015, and in 2016, it became the largest green-bond market in the world, Jun said. The state has launched 50 green investment funds and the private sector 200, he added.