The Development Of Green Municipal Bonds In China:the Next Step For Urban Infrastructure Financing

According to China's National New-Type Urbanization Plan(2014-2020),released in March 2014,approximately RMB 42 trillion(USD 6.75trillion)will be required to finance China's urbanization efforts over the next several years.Given the current background of environmental degradation and potential climate change impacts,significant additional levels of capital will be needed to upgrade environmental friendly infrastructure and to transform towards climate-resilient economics.Currently,debt financing is an increasingly attracting opportunity to fund environmental solutions.However,China's local governments are prohibited from issuing municipal bonds'because of a low level of transparency and an effective mechanism of public supervision.Green bonds,as a powerful instrument to mobilized capital from the private sector,has become one of the most popular methods to tackle environmental-related projects.The issuance of labelled green bond has reached an unprecedented peak in 2016,with China issuing more than any other country in the world.One particular type of green bonds—green municipal bonds—is largely employed by municipalities in developed countries such as the United States,Nordic countries,Australia,etc.However,the issuance of green municipal bonds in China remains at zero,even while the overall green bond issuance within the country developed "from zero to hero" in 2016.This thesis suggests that adopting green municipal bonds could serve to address the environmental financing needs of urban areas in China,and also provide the oversight necessary through the adoption of binding provisions within green bond principles.The paper is divided into four parts.The first part introduces the background and realistic demand of developing green bonds,while also providing the definition,characteristics and classification of green finance,green bonds and green municipal bonds.The second part compares different green bond principles to provide a deeper understanding of their role in green finance.The third part focuses on the successful experiences of issuing green municipal bonds from local governments in the United States,Australia and Finland.The fourth part introduces the different development stages of bond issuance rules for local governments in China,including the Urban Investment Debt,the semi-issuing municipal bonds by municipalities,and the latest pilot provinces and cities.The results of these comparative studies show that,under the premise of strict management and transparent supervision,giving local governments independent distribution and management of green municipal bonds is one of the best and most rational ways to provide financing support for local governments to achieve their goals in environmentally-related fields.