China rethinks how to fund environmental clean-up

The mainland planned to raise funds for its environmental clean-up and carbon-reduction goals by creating public-private partnerships (PPPs) and issuing "green" bonds, officials from the central bank and other financial authorities said yesterday.

The government is turning to PPPs - a previously eschewed financing method - to fill the gap between shrinking local budgets and the cost of measures demanded by the public to improve the environment, in a country where 90 per cent of cities failed to meet air quality standards last year.

To achieve its environmental goals, Beijing needs to lure up to 10 trillion yuan (HK$12.68 trillion) of private capital to green businesses over the next five years, according to speakers at a conference on funding mechanisms for a low-carbon economy.

"China's success in green development can be transformative for the global economy," said Hua Jingdong, vice-president of the World Bank's International Finance Corporation, a co-host of the conference. "The government needs to unlock capital in the market."

Local mainland governments, which depend on land sales for most of their revenue, have seen their budgets shrink as the property market has cooled.

This has led them to offer public-private partnership contracts worth 2 trillion yuan, mainly for water, pollution treatment and transport.