Financing the future: China’s influence on green finance

SUSTAINABILITY has become the buzzword in recent years. Environmental deterioration, such as glacier retreat, rising sea level and extreme rainfall and flooding, is getting severe. The recent massive flood across Southern Thailand has served as another reminder of the importance of preserving the environment.

Green finance must be widely promoted to support sustainable development. In this region, China has made substantial progress in developing its green finance architecture, and it has become the global leader in green finance.

Its development is fully supported by the government, under the aspiration to achieve "Beautiful China" by 2030, and is backed by state-owned entities. The People's Bank of China (PBoC) also released its green finance policy in 2021, which addresses five pillars: a standard system, disclosure requirements, an incentive-and-restraint mechanism, a product-and-market system, and international collaboration.

Under the green finance development, green finance instruments cover green loans, green bonds, green insurance, transition loans and green funds. In recent years, green finance in China has grown significantly. China is the global leader for green bonds.

However, recent 2024 data records slower growth in green bond issuance in China. Green loans totalled US$4.9 trillion in Q3, 2024, surpassing other green finance instruments. Several policies have also been developed in a conducive environment and under directives from top-level authorities.

For example, the Green Finance Endorsed Project Catalogue (2025 Edition) was released to unify the market, along with the relaunch of the China Carbon Emission Reduction (CCER) market. The Singaporean bank, DBS Bank Ltd (DBS), was chosen to participate in the CCER facility to receive funding from the People's Bank of China to issue a green loan. This is a form of financial integration in which China aligned its domestic policy to enable Southeast Asia players to participate in its financial market.

On the same note, the Huzhou Green Finance Pilot Zone has also played a pivotal role in driving China to achieve sustainable finance. Huzhou city, one of the pilot zones for green finance, has achieved remarkable progress in green finance standards, incentive policies, and a digital platform for small and medium enterprises.

Financial institutions in the Huzhou pilot zone have also issued a variety of green products, including green loans, insurance, and bonds. Subsequently, biodiversity credits and the transition finance taxonomy 2023 have also been launched. Huzhou city has transformed and integrated sustainability practices in its development, and its success should be learnt by neighbouring countries, including Southeast Asia.

China’s footprint in Southeast Asia has become remarkable through the Belt and Road Initiative (BRI). China has made a significant investment in clean energy in the region over the past 10 years. Indonesia received the most, followed by Thailand, Malaysia, and Vietnam, according to the latest records.

The recent data for the first half of 2025 shows that China invested US$9.7bil in green finance, and most investments go to green energy projects covering wind, solar, and waste-to-energy. The countries such as Thailand, Indonesia, and Laos receive the most. More specifically, the Green Silk Road, which makes BRI projects greener and more sustainable, is driving China toward becoming a major player in green development.

In the local context, China’s investment in Malaysia reached RM31bil in 2024, and China is consistently the major trading partner for Malaysia. In Malaysia, the majority of Chinese investments are in electric vehicles (EVs), batteries, and renewable energy.

For example, the 2025 Phase 2 EVE Energy expansion in Kulim, Kedah, will position Malaysia as a key player in global sustainable energy solutions. Other than that, China also heavily invests in green technology manufacturing and solar energy in Malaysia. With high uncertainty in global trade, we will observe greater challenges in promoting green sustainability initiatives.

China's financial engagement is also established through the China-led Asian Infrastructure Investment Bank (AIIB) and the China-Asean Investment Cooperation Fund (CAF). In Southeast Asia, CAF's investment has also evolved, focusing on businesses that practise environmental and social responsibility.

According to the Malaysian Securities Commission Chairman's 2025 statement, Southeast Asia needs green investments of between US$3.7 trillion and US$6.7 trillion to achieve its goal of carbon neutrality by 2050. This suggests an opportunity for China to tap into this capital demand, given its financial architecture and resources.

Different countries have different legislation and management systems, resulting in fragmented sustainable finance taxonomies and potentially higher costs and greenwashing risks. How can Southeast Asia and China work together to create a greener future for our young generation?

Southeast Asian nations and China can work together to create a greener future for the younger generation through harmonising green taxonomy. In 2020, the European Union (EU) and China worked together on the Common Ground Taxonomy (CGT) to harmonise the existing taxonomies for environmentally sustainable investments. Thereafter, Singapore joined in 2024.

Harmonising sustainable finance criteria will foster cross-border green investments. Including more Southeast Asian countries in the group will benefit the region by fostering a transparent and credible cross-border green investment ecosystem.

In October 2025, during the 47th Asean Summit, China and Asean signed the Free Trade Area 3.0 Upgraded Protocol, making a leap by including one new area, "Green Economy". A permanent working task force should be formed to align green policies and standards to promote sustainable growth among member countries.

At the same time, both parties, China and Asean, can establish a specific fund, such as the China-Asean Green Fund, to co-finance long-term green projects and thereby build a regional sustainable finance ecosystem. In terms of capacity building, it should be accelerated through knowledge and expertise transfer, as well as the transfer of technologies for sustainable impact.

Southeast Asia requires substantial investments to advance toward carbon neutrality by 2050. Public funds are scarce, and the flow of private funds to finance the funding gap will help achieve the goal. China is playing a vital role in this context, given its leadership in green development and established financial architecture.

Together, the collective effort from China and Southeast Asia will ensure a greener future for all.

Associate Professor Dr Chong Lee Lee is the head of Accounting and Finance at Asia Pacific University of Technology & Innovation. The views expressed here are entirely the writer's own.

The SEARCH Scholar series is a social responsibility programme jointly organised by the Southeast Asia Research Centre for Humanities (SEARCH) and Tunku Abdul Rahman University of Management and Technology (TAR UMT)