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How the game changer was generated? An analysis on the legal rules and development of China’s green bond market

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  • Tao Huang

    (Zhejiang University)

  • Qingyue Yue

    (Wuhan University
    King & Wood Mallesons)

Abstract

Despite its late start, China has become the world’s largest green bond market in a very short time. This extraordinary development is closely related to its unique rules system, which has also made China a ‘game changer’ to the green bond market. This article tries to explain the generation mechanism of the ‘game changer’ by comparing the rules systems of China and the international green bond market and examining the particularities of China’s financial market. Unlike the international green bond market, within which ‘soft laws’ are formed from the bottom up and are driven by investors’ joint efforts, stock exchanges, intermediaries, and social organizations, China’s green bond market is provided with a top-down system of rules, which are dominated by public departments and consequently manifests as a series of ‘hard laws.’ These rules provide a variety of favorable measures for the issuance of green bonds, and greatly stimulate the development of this newly emerged product under the condition that the liberalization of China’s bond market is limited at present. Nonetheless, this article also points out that amid existing financial market and regulation systems in China, the development of green bond markets needs to address the ‘regulatory arbitrage’ brought about by regulatory decentralization and should overcome the imperfection of implementation mechanisms. Therefore, the regulatory authority of green bonds should be exercised uniformly by the CSRC, and an effective constraint and disciplinary mechanism should be established.

Suggested Citation

  • Tao Huang & Qingyue Yue, 2020. "How the game changer was generated? An analysis on the legal rules and development of China’s green bond market," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 20(1), pages 85-102, March.
    • Handle: RePEc:spr:ieaple:v:20:y:2020:i:1:d:10.1007_s10784-019-09460-9
    DOI: 10.1007/s10784-019-09460-9
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    References listed on IDEAS

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    Cited by:

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    3. Gao, Yang & Li, Yangyang & Wang, Yaojun, 2021. "Risk spillover and network connectedness analysis of China’s green bond and financial markets: Evidence from financial events of 2015–2020," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    4. Hu, Xin & Zhu, Bo & Lin, Renda & Li, Xiru & Zeng, Lidan & Zhou, Sitong, 2024. "How does greenness translate into greenium? Evidence from China's green bonds," Energy Economics, Elsevier, vol. 133(C).
    5. Wenting Cheng, 2023. "The green investment principles: from a nodal governance perspective," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 23(3), pages 373-393, September.
    6. Hu, Yuanfeng & Tian, Yixiang, 2024. "The role of green reputation, carbon trading and government intervention in determining the green bond pricing: An externality perspective," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 46-62.
    7. Qi, Xiaohong & Zhang, Guofu, 2022. "Dynamic connectedness of China’s green bonds and asset classes," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    8. Nicky R. M. Pouw & Hans-Peter Weikard & Richard B. Howarth, 2022. "Economic analysis of international environmental agreements: lessons learnt 2000–2020," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 22(2), pages 279-294, June.
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    10. Vasundhara Saravade & Olaf Weber, 2020. "An Institutional Pressure and Adaptive Capacity Framework for Green Bonds: Insights from India’s Emerging Green Bond Market," World, MDPI, vol. 1(3), pages 1-25, November.

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