China’s carbon-neutrality push prompts major coal-production region to beg banks for financing

Local authorities in Shanxi province have stepped in to secure financial assistance for coal miners amid rising default risks

There is growing anxiety that the reluctance of banks and lenders to inject such funding could pose a serious threat to local economic stability

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Shanxi’s high exposure to the coal industry make it an easy target in Beijing’s carbon-reduction efforts. Photo: AFP

Published: 7:48pm, 23 Apr 2021Updated: 7:48pm, 23 Apr 2021

China’s ambitious carbon-neutrality goals do not bode well for miners in the coal-producing province of Shanxi, which is already facing financing difficulties after a series of high-profile domestic bond defaults last year.

As a result, local authorities have stepped in to court financial assistance.

At a conference attended by representatives of 160 financial institutions on Wednesday, local state firms and financial authorities joined efforts to shore up confidence by promising a timely repayment of mature debt.

“[You] should actively underwrite or subscribe the bonds of provincial-government-owned coal miners to support the transformation towards high-quality development,” Chang Guohua, director of the Shanxi Financial Supervision and Administration Bureau, said in his appeal to more than 500 attendees, urging them not to withdraw or scale back their financing support.

It came after President Xi Jinping vowed in September that China would reach carbon neutrality in four decades, with peak emissions expected in 2030. Expanding on that sentiment during a virtual summit hosted by his US counterpart Joe Biden on Thursday, Xi pledged to “strictly control” coal-fired power plants in China’s current five-year plan.

Earlier this month, central bank governor Yi Gang estimated that the carbon-neutrality push will cost China nearly 139 trillion yuan (US$21 trillion) by 2060, and he urged Chinese financial institutions to slash high-carbon assets and to embrace green finance.

Shanxi’s high exposure to the coal industry – it is the country’s largest miner with a coal output of 1.06 billion tonnes last year – make it an easy target in Beijing’s carbon-reduction efforts.

The coal-fuelled thermal power sector accounts for about 40 per cent of China’s carbon emission, research shows.

A similar consultation conference was held in Beijing two weeks ago, with 14 major state-owned financial institutions in attendance.