Cookies?
Library Header Image
LSE Research Online LSE Library Services

Out of the window? Green monetary policy in China: window guidance and the promotion of sustainable lending and investment

Dikau, Simon and Volz, Ulrich (2021) Out of the window? Green monetary policy in China: window guidance and the promotion of sustainable lending and investment. Climate Policy. ISSN 1469-3062 (In Press)

[img] Text (Revision_2_Green_Monetary_Policy_in_China-Manuscript_clean_author_detail_(22.11.21)) - Accepted Version
Pending embargo until 1 January 2100.

Download (606kB) | Request a copy

Abstract

Chinese monetary and financial authorities have been among the pioneers in promoting green finance. This paper investigates the use of one specific monetary policy tool, namely window guidance, by the Peoples’ Bank of China (PBC) and the China Banking Regulatory Commission (CBRC) to encourage financial institutions to expand credit to sustainable activities and curb lending to heavy-polluting industries. We investigate window guidance targets for the period 2001-2020 and find that ‘green’ targets were included by the CBRC from at least 2006 and by the PBC from 2007 to discourage lending to carbon-intensive and polluting industries and/or to increase support to sustainable activities. Both authorities stopped discouraging lending to carbon-intensive/polluting industries in through window guidance 2014. Sustainable objectives were subsequently also removed from the PBC’s list of window guidance priority sectors at the start of 2019, ending the practice of green window guidance in China. Sustainability-enhancing window guidance targets were replaced and formalised through new ‘Guidelines for Establishing the Green Financial System’, reflecting efforts to move away from controls-based towards marketbased policy instruments. Based on this analysis, the paper draws four lessons for the design of green finance policies for other countries that seek to enhance sustainable finance and mitigate climate change and related risks.

Item Type: Article
Official URL: https://www.tandfonline.com/toc/tcpo20/current
Additional Information: © 2021 The Author(s).
Divisions: Grantham Research Institute
Subjects: H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G2 - Financial Institutions and Services > G20 - General
Date Deposited: 24 Nov 2021 12:39
Last Modified: 17 Dec 2021 16:21
URI: http://eprints.lse.ac.uk/id/eprint/112725

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics