Aerial photo taken on Sept. 19, 2019 shows solar panels on the rooftop of a local automobile maker in Huzhou, east China's Zhejiang Province. The province is one of China’s five pilot zones of green finance launched in 2017. (File photo: Xinhua)
Financial technologies (fintech) have offered powerful new tools to help the green finance sector’s sustainable expansion in China and prompt more green behaviors, said a report released on Monday assessing successful cases of fintech applications in China’s green finance experiments.
“These tools can be scaled across China, but also in countries—particularly emerging markets—who are adopting fintech as well as seeking means to finance their sustainability goals,” said Deborah Lehr, vice chairman and executive director of the Paulson Institute.
The case study report was released by the Paulson Institute and the Research Center for Green Finance Development of Tsinghua University in China.
Green development has been incorporated into China’s national strategies. China is rising to become a global leader in green finance and has vast market potential to continue its rapid expansion.
A total of $31.3 billion green bonds and loans were issued in the Chinese market in 2019, making it the world’s second largest contributor in green finance, according to an annual summary compiled by the Climate Bonds Initiative.
However, China’s green finance prospects are also encountering headwinds as regional markets adopt different green identification standards and small and medium enterprises (SMEs) are struggling with seeking access to green capital.
Despite remarkable progresses, China’s green finance products account for a tiny fraction of its overall financial market. The sector’s next step depends on how to overcome these obstacles. Fintech offers creative solutions and financial institutions are willing to seize the opportunities with the help of these new tools, Sun Rui, senior advisor at the Paulson Institute, told the People’s Daily.
Through exploring practices and experiences in Huzhou city, a pioneer in China’s green finance development, the report shed a light on how emerging technologies like big data are applied to boost the transparency and efficiency of green financing.
Huzhou city, located in eastern China’s developed Yangtze River Economic Zone, is home to tens of thousands of private businesses, most of which are small and micro enterprises.
Unlike big firms which are always favorable borrowers to Chinese banks, small businesses have limited information and resources to obtain green credit, leading to higher financing costs.
Huzhou’s online lending system designated for green financing has helped channeled 163 billion yuan to small businesses.
In May 2018, Huzhou launched a comprehensive green finance service platform, which allows green firms and projects to file loan requests via a big data-powered system connecting with 35 local commercial banks.
The entire lending process can be handled online, which has extraordinary meaning in China as the country is hit by a wide-spreading infectious disease which has substantially reduced outdoor activities.
Another successful example is Huzhou’s green certification system, which is integrated with governments’ environmental scrutiny databases and is able to more effectively identify and classify green projects. So far, these platforms have helped channeled 163 billion yuan ($23.5 billion) to more than 13,000 small firms in Huzhou.
“Working hand in hand with Chinese financial institutions to provide innovative fintech products, we can build a comprehensive system that relies on big data, cloud computing, and AI technologies to achieve green finance goals,” said Liu Jialong, researcher of the Green Finance Committee of the China Society for Finance and Banking and intermediate researcher of the Research Center for Green Finance Development at Tsinghua University.