China c.bank issues first loans to back financing for emissions cuts

By Financial News On Dec 30, 2021

People in face masks walk past the headquarters of China’s central People’s Bank of China (PBOC), April 4, 2020. REUTERS/Tingshu Wang

BEIJING, Dec. 30 (Reuters) – China has provided the first 85.5 billion yuan ($13.4 billion) batch of low-cost loans to financial institutions to promote green projects and corporate efforts to reduce carbon emissions, the company said. central bank Thursday.

Under the CO2 Emissions Reduction Facility (CERF), the first of its kind being rolled out by the People’s Bank of China (PBOC), financial institutions can apply for low-cost financing to cover the loans they provide to help companies reduce emissions. fund efforts.

The CERF is part of China’s broader goal to peak carbon emissions by 2030 and reach carbon neutrality by 2060, and to protect the economy from the economic impact of the COVID-19 pandemic.

Under the CERF, the PBOC will provide financial institutions with funds equal to 60% of the principal amount of a loan at a one-year borrowing rate of 1.75%. That would be a discount from the seven-day reverse repo rate of 2.2%.

The bank has also officially issued low-cost loans to support companies’ efforts to use clean coal, Sun Guofeng, head of the PBOC’s monetary policy division, said at a news conference. He would not say how much has already been provided.

According to reports from Huatai Securities and Everbright Securities, the CERF could lead to 1 trillion yuan being invested annually in clean energy-related projects after the monetary tool is fully rolled out in 2022.

But banks are required to certify that the loans have been made to companies that can help the economy adopt cleaner energy or improve energy efficiency.

As targeted monetary policy tools, Sun said both the CERF and special clean coal loans can contribute to overall credit supply and stable credit growth.

In the coming year, “China will fully exploit the dual functions of monetary policy instruments, namely in terms of (adjusting the money supply) volume and structure,” Sun said.

($1 = 6.3752 Chinese Yuan Renminbi)

Reporting by Ma Rong, Cheng Leng and Gabriel Crossley; writing by Ryan Woo; Editing by Christian Schmollinger

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