Postal Savings Bank of China’s recent 300 million yuan (US$47 million) “sustainability linked loan” to a state-owned coal producer in Shanxi province has raised concerns among global climate think tanks, who fear it could undermine Beijing’s carbon reduction goal.
The move by PSBC to decouple the loan from any goals to reduce emissions or other environmental impact could also put China out of step with other parts of the world, the think tank said. Shanxi is China’s top coal producing province, churning out 1.06 billion tons of raw coal in 2020, about 28 per cent of the country’s total output.
The state-owned bank’s disclosure earlier this month on the “innovative green loan” it extended to Jinneng Holding Shanxi Coal Industry came after the State Council made a 200 billion yuan special refinance facility available to Chinese banks to support the country’s carbon emission reduction efforts.
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The State Council said banks can use the facility to back their lending to projects that involve the “clean usage of coal” – a term many market observers said defeated the object of Beijing’s own carbon reduction goals. They said PSBC’s move to offer a “green loan” to Jinneng Holding provides an early example of how Chinese banks could continue to finance new coal investment as they heed the government’s call.
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“The so-called clean usage of coal is getting all kinds of support in China. We don’t agree with that, as we fear that this is an excuse for coal expansion,” said Lauri Myllyvirta, an analyst at the Centre for Research on Energy and Clean Air based in Finland.
The loan from PSBC could set a trend for banks to continue financing the coal industry with the state’s endorsement, said Myllyvirta. This would ultimately undermine President Xi Jinping’s pledge for carbon dioxide emissions to peak before 2030, and reach net-zero by 2060, he said.
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PSBC has provided US$7.9 billion of financing to fossil fuel projects in the five years since the Paris Agreement was signed in 2016, ranking it 52nd of the 60 global banks that have provided a combined US$3.8 trillion, according to a study released in April by six NGOs including Rainforest Action Network, and Reclaim Finance.
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