context: The latest policy is part of a broader effort to channel capital into green projects. PRC financial regulators have repeatedly highlighted the need for reforms to advance high-level openness in cross-border investment and financing. It also builds on the 'Implementation plan for high-quality development of green finance in the banking and insurance sectors', jointly issued by the National Financial Regulatory Administration and the People's Bank of China, which calls for expanding the green finance system.
SAFE (State Administration of Foreign Exchange) announced it will launch pilot programs for green external debt in 16 provinces and cities. The initiative encourages non-financial enterprises to use cross-border financing for green or low-carbon transition projects. Pilot regions include Shanghai, Beijing, Tianjin, Hebei, Jiangsu, Zhejiang, Anhui, Fujian, Shandong, Hubei, Sichuan and Guangdong. Municipalities include Ningbo, Xiamen, Qingdao and Shenzhen.
Under the policy, eligible domestic companies can obtain funding in RMB or other foreign currencies from non-residents, specifically for green or low-carbon projects that meet requirements set by PBoC (People's Bank of China) and other regulators. 'Non-residents' refer to institutions and individuals located outside the PRC, as well as their non-permanent establishments legally set up in the PRC.
Cross-border financing channels include inter-company direct loans, bank-enterprise loans and overseas bond issuance. Under PBoC's existing framework for cross-border financing, the risk-weighted balances of companies are capped in proportion to their capital or net assets. Green projects will require less of a company's overall cross-border financing quota, effectively raising the ceiling for those investing in green development.
Registration of green external debt will be handled directly by banks, improving convenience and making it easier to attract financial resources to the PRC's green, low-carbon sectors, according to SAFE. Allowing banks to directly process foreign debt registration is part of SAFEs recent reforms to promote financial openness.