SEPA Vice Minister Pan Yue told the media about the progress made in the green credit policy during the first phase. He said, thanks to the efforts of the last six months, we have achieved stage-based results in some aspects of the green credit policy, but they still fall far behind the expected goals, and there're some institutional and technical difficulties in extending the influence of the policy. SEPA expected to cooperate with financial departments on trying to establish a mature green credit mechanism.

Pan Yue said, SEPA, People's Bank of China and China Banking Regulatory Commission jointly issued in July 2007 the Opinions on Implementing Environmental Protection Policies and Rules and Preventing Credit Risk, which marks that the economic approach of green credit policy has entered the main battlefield fighting for reduced pollution. The document was responded by the financial systems and environmental authorities in most areas, among which those departments of 20-odd provinces like Jiangsu, Zhejiang, Henan, Heilongjiang, Shaanxi, Shanxi, Qinghai and cities like Shenzhen, Ningbo, Shenyang, and Xi'an had jointly developed the implementation plans and detailed rules for green credit policy.

Pan said since the green credit policy was introduced, the first group of enterprises restricted for credit loans were some of the enterprises that violated the environmental laws and were restricted by SEPA for their approval of construction projects. In July, China Banking Regulatory Commission forwarded to the commercial banks the list of 38 enterprises punished by SEPA because they failed to go through formalities on approving their environmental impact assessments, did not implement the "three simultaneities" system, discharged emissions against the standards or used the production processes that should be eliminated, as well as the list of local areas and relevant enterprises that were restricted for approval of construction projects. 12 enterprises were restricted by local financial departments on application for loans. For example, Bengbu Jiucailuo Chemical Co., Ltd. and Bengbu Haichuan Chemical Co., Ltd. of Anhui Province, Chunjiang Paper Processing Co., Ltd. of Daqing City in Heilongjiang Province, the Coking Co., Ltd of Xingyuan Group in Xiangfen County of Shanxi Province, Shuangren Chemical Co., Ltd. of Xinjiang County in Shanxi Province, Jinyun Steel & Iron Co., Ltd. of Shanxi Province, and Jiuzhou Dairy Co., Ltd. of Lanzhou city had been suspended of credit loans. Yuncao Alcohol Company of Anhui Province and Tongguanshan Chemical Co., Ltd. of Tongling City had not only been suspended loans, but also withdrawn the previous loans.

Pan Yue said, the financial institutions of some provinces had actively embraced the environmental law enforcement and taken strict steps to suspend or limit their loans to enterprises punished by SPEA. They were laudable. For example, the financial institutions of Shanxi Province had suspended the loans (up to 61.7 million yuan) to four enterprises, including the Coking Co., Ltd. of Xingyuan Group in Xiangfen County, Shuangren Chemical Co., Ltd. of Xinjiang County, Linyi Subsidiary of Fengxi Fertilizer Co., Ltd. and Jinyun Steel & Iron Co., Ltd.. Panzhihua Commercial Bank of Sichuan Province had cut down the credit line amount of three enterprises by 440 million yuan, including Chuantou Chemical Industry Group, Zhuoyue Investing Co., Ltd., and Dingjin Coking Co., Ltd. The city commercial bank suspended up to 300 million yuan of loans to the three enterprises. The financial institutions of Anhui Province suspended the loans to Yuncao Alcohol Company and Tongguanshan Chemical Co., Ltd. and withdrew 12.5 million and 5 million yuan of granted loans respectively.

Besides, some local governments also promoted the implementation of green credit policy. In 2007, Jiangyin City of Jiangsu Province rejected more than one billion yuan of loans to heavy polluting enterprises and withdrew over 200 million yuan of granted loans to them. Huzhou City of Zhejiang Province conducted surveys on the major polluting enterprises, which involved 1.57 billion yuan of bank loans. The credit banks urged the enterprises to rectify within a limited period and discharge pollutants up to standards by threatening to withdraw the loans already granted to them. 35 enterprises gave up their loans due to failure to meet the environmental standards, involving more than 214 million yuan of loans. The banking system of Guangdong Province (except Shenzhen city) restricted 400 million yuan of loans to seven enterprises according to the information provided by the environmental system on environmental violations. Shenzhen Special Economic Zone restricted both the polluting enterprises and the financial institutions, not only suspending 137.7 million yuan of loans to five polluting enterprises including Shenzhen Tongxin Electronic Co., Ltd., but also having the financial institutions to punish two banks that granted loans to enterprises in violations of environmental laws.

The vigorous support of Central financial authorities and some of the financial institutions is one of the important reasons why the green credit policy can be introduced and promoted, said Pan Yue. After introducing the green credit policy, China Banking Regulatory Commission issued in July and November the Circular on the Prevention and Control of Risks of Loans to Energy-hungry and Polluting Industries and Guidelines on the Credit Line for Energy Saving and Emissions Reduction, asking financial agencies of the banking industry to cooperate actively with environmental authorities, earnestly carry out the industrial policy and market access conditions for controlling energy-hungry and heavy polluting projects, and to have classified management (Type A, Type B, and Type C) according to the extent of environmental impacts imposed by the loan-receiving projects.

Of the commercial banks, Industrial and Commercial Bank of China firstly issued last September the Opinions on Promoting the Green Credit Policy, proposing to set up a "one-ballot-veto" system, namely, to reject the credit loans by the single ballot of the borrower's environmental performance. The bank shall refuse to lend to projects not in compliance with environmental policies, and suspend the applications of enterprises and projects in the list for restricted approval in regional areas or watersheds for credit supports of all kinds before the banning order expires. The bank gave labels of environmental information of corporate clients and initially formed a database for the clients' environmental risks. Of the nearly 60,000 corporate clients holding loans from the bank, about 47,000 had been recorded of their environmental information.

As a policy-oriented national bank, China Development Bank strictly controls the loans to industries with high pollution and high energy consumption on the one hand, and on the other hand, provides "Special Loans for Energy Saving and Emissions Reduction", mainly for funding eight kinds of projects such as water pollution treatment projects and SO₂ treatment projects in coal-fired power plants. The loans to green projects have increased by an annual average of 35.6%. By the end of 2007, 15 branches under China Development Bank have lent 30 billion yuan to environmental projects. Among others, in cooperation with Jiangsu Province, Jiangsu Branch has planned to invest 4.5 billion yuan in treating the pollution of the Taihu Lake.

At the same time, SEPA has provided more than 30,000 pieces of information on violation of environmental laws to Credit Information System Bureau under People' Bank of China, so that commercial banks may suspend or limit the loans to enterprises according to this information. According to this Bureau, some other enterprises has been limited to credit loans because they discharged pollutants illegally, or because their construction projects failed to have the EIA statements approved. 

However, Pan Yue emphasized that we should be clearly-minded that green credit policy has only achieved stage-based partial results, far from the anticipated goals. The main reason for this is that there are still some provinces and financial institutions that fail to carry out the green credit policy or even if they do, the implementation is superficial. On the one hand, green credit policy is introduced not for long, there're restrictions in terms of understanding, basis and information. On the other hand, the heavy polluting and energy-hungry industries are still protected by local policies and profitable. Some of them are even highly profitable. Therefore, it is hard to trim the credit loan scale by a big margin. To change this situation we need the arduous efforts from all.

Pan Yue pointed out that apart from institutional reasons, there're four technical difficulties in promoting the green credit policy. First, many small-and medium-sized polluting enterprises raise funds from the society or by themselves, barely borrowing from the financial institutions. Green credit policy cannot yet restrict such numerous polluting enterprises that are widely distributed. Second, the information communications mechanism needs to be improved to be more effective. Some of the local environmental authorities fail to release pertinent and timely information on violation of environmental laws, fail to meet the demands of the banks for examining the credit loan applications, and affect the effectiveness in implementing green credit policy. Meanwhile, commercial banks cannot yet provide the feedback on use of environmental information, failing to share the data. They are short of the specialized personnel, institutions and systems for credit loan policy. The staff members in charge of credit loans do not fully understand the environmental laws, regulations and policies, which prohibit the green credit policy from going deeply. Third, the standards for the green credit policy are comprehensive and fundamental, lacking specific guidelines for green credit loans, standards to rate the environmental risks, etc.. So that commercial banks are hard to formulate relevant regulation measures and detailed internal implementation rules. All this makes the green credit policy less operational. Fourth, there's no incentive mechanism to promote the green credit policy. Lack of incentive economic supporting policies for enterprises with good environmental performance makes it less effective to attract banking sector to support environmental projects.

Pan Yue said that SEPA would address these problems from three aspects.

First, SEPA will further improve the mechanism for information communications and sharing between environmental and financial sectors. SEPA has signed with China Banking Regulatory Commission the Agreement on Information Exchange and Sharing, established the first information sharing mechanism of its kind between state environmental authorities and macro economic control departments. We strongly expect local environmental and financial departments at all levels to establish an information communications mechanism as soon as possible according to local conditions and by way of joint meetings and information platforms, regulate the information notification forms and intensify the environmental trainings of relevant persons.

Second, SEPA will enhance the guidance to commercial banks and policy-oriented banks on credit loans. By fully learning the relatively mature environmental credit principle in the international community-the "equator principle" proposed by international financial companies and the environmental, health and safety guidelines of major industries, SEPA will work out list of green credit loans that are suitable for national conditions as well as the guidelines for credit loans to polluting sectors. This will both guide the banks to invest in environment-friendly sectors and projects and limit the credit loans to projects that pollute the environment or damage the ecology. SEPA will study and rate the scales of environmental violations and environmental risks in order to provide better supports for banks to assess and examine the credit loans.

Third, SEPA will speed up the formulating of environmental economic policies that can cooperate with the environmental credit loan policies. According to the requirements for establishing a mechanism for scientific development, SEPA will continue to study the environmental economic policies like environmental tax, eco-compensation, green securities, green trade and the environmental pollution liability insurance, build up the policy environment in favor of the growth of green credit policy, leverage the enterprises' environmental behaviors by economic interests, control the too much environmental cost for economic growth in our country, and lay a solid institutional basis for implementing the scientific outlook on development.

Pan Yue said the implementation of scientific outlook on development needs supports of forceful systems. A mature and perfect set of environmental economic policy systems is one of the important institutional arrangements for scientific outlook on development. Green credit policy is the first step towards establishing this system. Whether a good step or not, it is directly related to the introduction and implementation of other policies like green insurance and green securities, directly affecting how fast and how good the whole system will be established. The setback of the green credit policy indicates the difficulty in changing the current framework and rules. It is a much more serious test on the preachers of this policy. SEPA will hold its strong position as always, continue the cooperation with financial departments and try to work hard for establishing a green credit system that can be truly implemented.