Green bond sales in China may recover through the rest of the year, aided by lower global interest rates, after a 45.7% plunge in internationally aligned issuance in the second quarter.
The second-half outlook is "notably positive," said Chen Chen, vice president of sustainable finance at ING, in an emailed response. The government's "steadfast commitment to climate goals, improving domestic and international financing conditions, and the increasing alignment of Chinese green bonds with global standards" will support activity, Chen said.
Just $14.23 billion of internationally aligned green bonds were issued in China in the June quarter, leaving first-half sales down 45.9% at $23.28 billion, based on data from nonprofit organization Climate Bonds Initiative. Financial corporates accounted for the majority of deals, while the share of government-backed entities rose to 12.10% from 9.49% in the first quarter, the data showed.
Global interest rates may fall in the second half with the Federal Reserve potentially reducing rates as early as September amid concerns of an economic slowdown. The European Central Bank made a cut in June, while the People's Bank of China lowered rates in late July, including the mortgage benchmark, to support the economy, especially the housing market.
"Anticipated interest rate cuts in both the US and China will likely stimulate borrowing," Chen said.
China has supported issuance of green bonds as part of wider efforts to reach peak emissions by 2030 and net-zero by 2060. The nation is also promoting sales of green bonds aligned with international rules, rather than domestic standards, to curb greenwashing, or the overstatement of environmental credentials to access the green bond market's lower borrowing costs.
Second-quarter issuance of nonaligned green bonds fell 37.1%, according to Climate Bonds Initiative data. The rules on how issuers can use proceeds from domestically aligned bonds are looser than those for debt aligned with international norms.
China ranked fifth in global green bond issuance in the quarter, after Germany, France, Italy and the US, down one place from the preceding quarter.
