Beijing eyes green initiatives to boost growth while cutting smog

Days before Beijing cut bank reserve requirements earlier this month to boost lending to the slowing economy, officials in Hebei province met with dozens of banks and steel mills to find financing to revive local industry and tackle chronic environmental problems.

During the meeting with 32 banks and 64 steel mills, which came a month after Premier Li Keqiang voiced support for financing initiatives for the smoggy northern province, 18 banks agreed to lend more than 623 billion yuan (HK$790 billion) for "technological renovation and industrial transformation" this year, Hebei's industry bureau said.

As China's economy struggles and heavily leveraged banks restrict lending to polluting industries, Beijing is urging targeted capital injections not only to improve the environment, but also to stimulate growth in cutting-edge industries like emissions controls and water treatment.

"Hebei is enjoying favourable financing support due to its proximity to the capital and the urgency of cleaning up air pollution," said Chen Bo, economist with the Central University of Finance and Economics.

The Hebei government would not comment for this story but has previously said banks had pledged a further 761.3 billion yuan to help develop the private sector in the province.

Hebei's steel mills must comply with tough state pollution standards by the end of the year, but with cash scarce and demand weak, firms are struggling to do so. Neither the reserves cut nor the financing package is expected to rescue Hebei's worst-performing firms, but it could help favoured enterprises pay for upgrades and cover higher compliance bills.