China stimulates the economy through green investments

China is the biggest single loan client for the Nordic Investment Bank outside the member countries. In an interview with NIB Newsletter, Ms Sun Xiaoxia, Director General of the Ministry of Finance in China, explains how sustainable development has become a common goal for her country and how NIB loans can contribute to this development.

China has experienced rapid economic growth during recent years. What is the national strategy to make this growth sustainable from an environmental point of view?

In fact, as early as in 1983, the Chinese government made environmental protection an important national policy. It is a common understanding among government officials and people that only environment-friendly development can stay sustainable. This is why China was among the first group of countries who developed Agenda 21 after the 1992 UN Environment and Development Conference.

“Economic growth, social development and environmental protection remain the three pillars of Chinese sustainable development,” said Sun Xiaoxia, Director General of the Ministry of Finance in China.

Against the backdrop of the international financial crisis, the Chinese government is taking environmental protection and promoting green development as an opportunity to transform business-as-usual ways of economic development. In the 4 trillion Chinese yuan stimulus package, 2.1 trillion yuan has been invested in energy efficiency, ecological conservation and environmental protection. Environmental protection has been a positive driver for economic growth and employment. Green development has thus become a common goal in China.

China is the world’s most coal-dependent economy. What are the plans to reduce this dependency?

It is true that coal has played an important role in the Chinese economy. However, with the stipulation of the Renewable Energy Law, the Chinese government has adopted various measures to increase the renewable energy in the energy mix, such as hydro, wind, solar, nuclear and biogas.

In December, world leaders will gather for a Summit in Copenhagen to establish a global agreement to fight climate change. What will China’s position be at that meeting?

Climate change is a fact, affecting people’s daily life. China will continue to play a constructive role in the consultations and negotiations under the principle of common but differentiated responsibility.

As for the success of the Copenhagen meeting, the key is to strictly follow the mandate of the Bali road map, the core of which is to further strengthen the United Nations Framework Convention on Climate Change, and the Kyoto Protocol through comprehensive, effective and sustained implementation, focusing on mitigation, adaptation, technology and funding issues.

“Economic growth, social development and environmental protection remain the three pillars of Chinese sustainable development.”

Sun Xiaoxia

Director General of the Ministry of Finance in China

First, we must quantify the developed countries to significantly reduce emissions. Second, developed countries should honour their funding, technology transfer and capacity-building support commitments; Third, under the framework of sustainable development in accordance with national conditions, developing countries should take appropriate mitigation actions.
NIB has cooperated with China since the 1980s and more than 200 projects have been financed with NIB loans. Where do you see the most visible impact?

Geographically speaking, we have NIB-financed projects in almost all the Chinese provinces, municipalities and autonomous regions (except for Taiwan). NIB loans have financed projects in a broad area such as environmental protection, infrastructure, medical service, rural development, and education. Through the NIB-financed projects, we have introduced advanced equipment and technologies from NIB member countries. I could say that these projects have helped local employment, improved people’s quality of life and supported the social and economic development of the project area.

In China, NIB has only one partner, the Ministry of Finance, which serves as a window for NIB in the country. How does this allocation work in practice?

China works with NIB following the model of loan programmes, such as the General Loan Programme and the Rural Loan Programme. Upon the signing of the loan programmes, the Ministry of Finance shares the information, including the agreed terms and conditions, with the local governments and relevant partners. New projects are selected in accordance with the priorities of the Chinese economy and NIB eligibility criteria. We want the loan cooperation to be mutually beneficial.

Which aspects of cooperation do you think still need improvement?

In general, the cooperation between NIB and the Ministry of Finance has gone smoothly and productively during the past decades, but there is still much room for improvement. Among all of the bilateral and multilateral sources of financing, NIB loans could be more competitive and attractive, particularly in terms of the pricing, compared with other partners of the Ministry of Finance. We accepted the pricing adjustment during the extremely special market turbulence earlier this year. It is our common understanding that, once the capital market has recovered, the pricing should be adjusted back to a reasonable and appropriate scope in due time. With the market conditions getting better, we hope NIB improves its loan conditions accordingly.

Furthermore, the Chinese economy is at a critical stage of restructuring, calling for advanced management skills and technologies. “Knowledge” cooperation is essential, for example, to hold seminars and workshops on topics and fields of common interest.