Jilin meet notes benefits of 'G-finance'

300 participants discuss how markets, credit can change the environment

After the financial turbulence last year, a new development strategy is needed to restore order to the market, according to a high-level international financial meeting that began today in Changcn, capital of northeast China's Jilin province, and will end tomorrow.

So called "green finance" would be "an important choice", according to organizers of the meeting. The event attracted around 300 delegates, including financial experts, entrepreneurs from Fortune 500 enterprises and government officials.

Now a buzzword for finance in sustainable development, so-called G-finance is a combination of all financial elements that serve eco-friendly industries as well improvements in traditional industries to control pollution.

It covers all financial systems for green agriculture, manufacturing, consuming and service to reduce emission and protect the environment.

G-finance is part of a worldwide trend to turn to a healthier and more environmentally friendly growth pattern known as green development.

The United Nations launched its Global Green New Deal in October, 2008.

The European Union announced last March that it will invest 105 billion euros ($133.7 billion) by 2013 to fund its green economy, which is also designed to boost economic growth and employment.

The US government earmarked $67.7 billion in its economic stimulus package for development of clean energy and improved transportation. Another $150 billion is planned to develop renewable energy in the next 10 years.

The Japanese government plans to expand its green economy to a 100 trillion yen ($1.2 billion) scale by 2015.

In 2009 the South Korean government announced it will invest 50 trillion won ($40 million) into environmentally friendly sectors in the following four years.

The green economy is also playing a crucial part in China's development, as Chinese President Hu Jintao called for greater efforts toward a green, low carbon economy at the 2009 UN Climate Change Summit.

Meeting the trend

As an innovative financial model required by the green economy, G-finance fits the global trend in the post-crisis age as well as China's strategic plan for "scientific development".

Yet at present, most nations are still boosting their green economy by fiscal means, and the system of green finance has yet to be established.

The ongoing Changchun international financial meeting aims to draw global attention and understanding to help put the idea into practice.

In recent years, China has taken the initiative in G-finance by unveiling a series of measures to support industrial restructuring, optimization and upgrade.

Loans granted by major Chinese commercial banks to the high energy-consuming steel and electrolytic aluminum industries increased by 13 and 19 percent respectively in September 2009, much lower than the average increase rate of 31 percent in the same period.

In the flat glass industry bank loan growth even dropped by 45 percent.

China has slashed energy consumption per unit of GDP by 14.38 percent, and sulfur dioxide emission by 13.14 percent in the past four years.

There is a financing demand of more than 2 trillion yuan in China's new energy sector in the next 10 years.

More than 600 billion yuan is also required for environment protection and renewable resources development annually.

Estimates of China's potential carbon market exceed 300 billion yuan.

All provide great potential for the development of green finance in China, industry insiders said.

G-finance will also promote internationalization of China's currency. "Green bonds" issued on the international market priced in renminbi could generate a range of new investment.

Beside green bonds, G-finance also contains other services including green credit loans, green funds and carbon finance that could be a revolution in the current financial system, products and trading modes.

Various vehicles

Green credit loans encourage reform of traditional industries and at the same time set limits on high-energy consumption.

Green funds, consisting of industrial investment funds and private equity funds, are raised to finance the low-carbon and renewable economy, including green manufacturing, agriculture and consuming, with eco-friendly and high-tech features and promising payoff in sight.

Carbon finance is a system serving the carbon trade. China will become a large market of carbon finance with an estimated annual carbon trade volume of more than 200 million yuan in the future.

To develop G-finance, China needs to take a series of actions, experts suggested at the meeting.

The central government should establish a G-finance supervision mechanism, mapping out related policies and formulating regulation for market access and pricing limit.

Specialized financial institutions should be founded to promote pollution control.

An open G- financial market will be established, encouraging capital to flow to eco-friendly sectors. The current focus is to build a green bond system based on the renminbi, experts said.

Development of G-finance also calls for international cooperation, borrowing experience from other nations and cultivating the global market, they said.

Source:China Daily