Problems And Measures Of PPP Project Financing Supported By Green Finance In China

Green finance means economic activities,including support for environmental improvement,actions on climate change as well as highly efficient use of resources.Scope of investment includes environmental protection,energy saving,clean energy,green transportation,green buildings and other fields.At present,most of the PPP projects in China are infrastructure projects related to the people's livelihood,and generally have the requirements of green environmental protection.The nature of green finance determines that its investment areas conform to the environmental requirements of most PPP projects.The characteristics of green financial products naturally meet the financial needs of PPP projects,and the financing of PPP projects supported by green finance would be very promising.However,the financing of PPP projects still have many difficulties and problems because of incomplete development on the green finance and insufficient strength of social capital.These problems in PPP project financing supported by green finance mainly include the following factors.First of all,the investors are not capable of identifying green industries effectively,hindering the development of green financial instruments in the capital market.It results from the lack of a uniform standard for the definition of "green" in the market and the lack of approach to environmental information in enterprises,on the contrary the financial instruments of capital market such as greenfund,green asset securitization can provide long-term financing support for PPP projects.Secondly,green finance is a new field with immature business mode,with an increase in bad debt rate of commercial banks and decline on the quality of assets Based on above factors,the costs of their new business are increased by trial and error.Meanwhile,the government also lacks of a substantial motivated mechanism.It results in slow development of green financial business for some financial institutions Most of them only keep at the policy level.In addition,with some influential thoughts on of traditional bond financing,the financial institutions of our country are more inclined to have the debt financing of real estate,land,etc as mortgages,Moreover,the main financing body of the PPP project is just newly established PPP project company,which lacks of the credit record and fully financial guarantee.In fact,the PPP projects need equity investment,it enable the financing support of green finance to meet the short period of PPP projects funding needs.PPP projects still undergo the pressure of refinancing in the later period.Regarding the above problems and factors,China can take the following measures.First of all,unify the standard of "green" definition,improve information open system,establish effective green industry identification mechanism,and increase the proportion of direct financing in green finance business.Secondly,we should improve the legal system of green finance,clarify the social responsibility of commercial banks,develop the market of green asset securitization as well as the market of green insurance,and make full use of the function of risk sharing of green insurance in PPP financing.In addition,we may take into account that incentive policies should be introduced such as giving priority to green bond holders,obtaining tax incentives,and reducing the risk weight of green financing,these policies can actively motivate financial institutions to develop green financial business.At the same time,financial institutions should also expand the service mode of green finance,and consider providing package services such as law,finance,financing consultation,project refinancing and etc.during the whole PPP project cycle.Finally,the social capital party involved in the PPP project should also enhance its own strength and reduce the financing cost;It is necessary to speed up the system construction of thesocial capital side association and solve the problems in the social capital square association,for example,difficulties of determining the qualification level and ambiguity of power and duties.