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Climate change: China’s central bank unveils lending facility to spur funding for carbon-reduction projects in net-zero drive
- China’s central bank offers a one-year lending facility at 1.75 per cent rate to subsidise funding costs for low-carbon emission projects
- Chinese lenders handed out US$1.5 trillion of ‘green loans’ at end of September, according to central bank data
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China is rolling out a lending facility at extremely favourable interest rates to support businesses engaged in low-carbon emission projects and renewable energy ventures, the latest move to undergird its long-term net-zero targets.
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The People’s Bank of China said it will provide a one-year facility for commercial banks at 1.75 per cent to subsidise their lending to green initiatives, it said in a statement on its website late on Monday. China’s one-year loan prime rate (LPR) stands at 3.85 per cent, while the five-year rate is at 4.65 per cent, unchanged since April 2020.
Banks can tap into the lending facility for up to 60 per cent of the loans they extend to businesses in these ventures at prevailing benchmark lending rates, the central bank said.
“Based on the premise of independent decision-making and risk-taking, financial institutions [should] indiscriminately provide carbon emission reduction loans to all types of enterprises engaged in the key carbon emission fields,” according to the statement.
The LPR is seen as the local benchmark funding cost since a reform in 2019. While the rate is technically decided by a group of 18 banks, the cost is regarded as Beijing’s preference on commercial lending.
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