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China remains world's second largest green bond market in 2017

Chinese-issued green bonds reached US$37.1 billion in 2017, up 4.5% from the prior-year period as the country maintained its place as the world's second largest green bond market.

The Chinese market issued 118 green bonds in 2017, 62% of which, or US$22.9 billion, were in line with international definitions of such instruments.

This sector has grown as a result of regulatory reform, momentum at the local level and a diversification of issuer types, noted a Feb. 8 report by the China Central Depository & Clearing Co. Ltd. and the Climate Bonds Initiative. The latter is a London-based nonprofit body that aims to promote green investment.

The U.S. was the world's largest green bond market in 2017 with a total issuance of US$42.4 billion, while the year's largest cumulative issuer was China Development Bank. According to a Jan. 10 Climate Bonds Initiative release, the policy bank issued US$4.6 billion of green bonds in 2017.

Globally, green bond issuance should reach US$1 trillion per year by 2020 for it "to make a meaningful contribution to climate finance," the Feb. 8 report noted. As of Dec. 31, 2017, this totaled US$155.5 billion.

To meet the 2020 target, the Chinese green bond market needs to "grow tenfold in just three years." This may be achieved, the report added, by catalysts like increasing green sovereign and sub-sovereign issuance, and inter-country capital flows, as well as boosting Hong Kong's role as a "super connector" between China and the world.