Green bonds in China and the Sino-British collaboration: More a partnership of learning than commerce

Abstract

This article explores the role of Sino-British collaboration in promoting green bond development in China, the extent to which it meets the United Kingdom’s wider objectives regarding the UK-China bilateral relationship and the underlying factors. Drawing on desk research and interviews, it tests and validates the hypothesis that the key driving force for this development is the coupling of the financialisation of the Chinese economy and the politics of ‘ecological civilisation’, although learning through international interaction has also played a role. It further shows that the scope for the United Kingdom to benefit from this growth is limited by the structure of UK-China trade, China’s strong macro-economic control and its approach to international relations that prioritises learning and identity transformation rather than the opening up of its markets. Inter-hub competition also plays a part.

What explains the emergence and diffusion of green bonds?

“…the CBI) and spatially mobile system resources (e.g. the GBPs) in their diffusion and the development of transnationally integrated domestic niches (Zhang, 2019). In making these observations, we highlight the value of integrating different conceptual approaches in seeking to understand environmental financial innovation.…”

An Institutional Pressure and Adaptive Capacity Framework for Green Bonds: Insights from India’s Emerging Green Bond Market

“…Institutional isomorphism or the process to gain homogeneity in the face of future uncertainty like environmental change, can be driven by both formal and informal norms and dynamics that govern institutional transitions [5]. According to institutional theory, institutional transitions can occur due to coercive pressure from formal or informal rules exerted by one institution on another-in our case, this can be categorized as formal regulations or informal communication by a primary social actor in the green bond market [20,27]. The most formal and direct coercive pressure in this market can be through formal and targeted regulations like green bond disclosure norms or green taxonomy frameworks, which are usually provided by governments or regulators based on the country or region [20,28].…”

“…According to institutional theory, institutional transitions can occur due to coercive pressure from formal or informal rules exerted by one institution on another-in our case, this can be categorized as formal regulations or informal communication by a primary social actor in the green bond market [20,27]. The most formal and direct coercive pressure in this market can be through formal and targeted regulations like green bond disclosure norms or green taxonomy frameworks, which are usually provided by governments or regulators based on the country or region [20,28]. Indirect but formal coercive pressure can also be felt due to climate-related government fiscal policies like the green credit guidelines in China [28] or financial incentives for greater renewable energy investments [29] at the regional or local level [19]-which may or may not have a direct impact on the market, but end up creating incentives for greater green investment flows [2,16].…”

“…So far, the green bond market literature has addressed financial aspects and motivations, such as its positive corporate performance [6], pricing differential [7,8], market liquidity [9,10], comparative financial returns [11,12], investor risk perception [13][14][15], impact and reactions from other types of financial markets like credit [16], treasury, energy [17] and the stock market [18]. However, only a few papers have sought to address the institutional dynamics that play a role in this market from a developing or emerging economy standpoint [10,19], with most focusing on the voluntary governance aspects of this market [20,21]. Our exploratory study contributes to the literature in terms of a country-level analysis of this market, with implications for institutional impact in an emerging economy.…”

Diffusion and innovation for transition: transnational governance in China’s green bond market development

“…In the context of policy diffusion, this helps explains the selective adaptation of policy content, as opposed to convergence with global rules on labeled green bonds. While transnational learning played a role in explaining the rapid expansion of China's GBM, additional empirical research suggests this phenomenon is a moderating variable to the more dominant and longrunning force of China's economic financialization and the central directives of pursuing ecological civilization (Zhang 2018).…”