China should set up carbon ‘connect’ scheme to woo foreign investors – expert

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BOAO, China – China should launch a pilot “connect” market access programme for carbon with Hong Kong to enable foreign investors to enter the country’s fast-growing green finance sector, a leading Chinese expert said on Thursday.

China’s existing connect schemes for stocks and bonds allow Hong Kong and overseas investors to trade in securities listed on domestic mainland exchanges and vice versa.

“We should establish such a channel – a bridge in Hong Kong, which will enable foreign investors to participate in some liquid carbon markets,” said Ma Jun, chairman of the Green Finance Committee of the China Society for Finance and Banking, a body set up by China’s central bank.

A pilot could link Hong Kong and the southern province of Guangdong and then be expanded nationwide as liquidity improves, Ma, a former central bank adviser, told reporters at the annual Boao Forum for Asia.

Guangdong has said it will study the feasibility of a carbon trading market in the Guangdong-Hong Kong-Macao region, known as the Greater Bay Area, as part of efforts to draw the economies of the two territories closer to the mainland.

China extends more loans for green financing than anywhere else in the world and that green credit now is likely to grow to 20% of its total credit in the future from 10% now, Ma said.

Green bonds as a proportion of China’s total bonds are expected to increase tenfold from the current level of about 2%.

China’s national emissions trading scheme (ETS) was launched last year after years of delays but covers only the power sector, allocating permits based on a plant’s “carbon intensity” rather than its gross emissions.

The scheme is to be expanded into other industrial sectors starting from this year, including steel, nonferrous metals and building materials.

(Reporting by Kevin Yao and Xu Jing; Additional reporting by David Stanway; Editing by Edwina Gibbs)