China has officially launched a pilot program for green foreign debt financing, a strategic move designed to channel international capital toward the country's low-carbon transition and sustainable development projects. Announced by the State Administration of Foreign Exchange (SAFE), the initiative covers 16 provincial-level regions and cities, including Shanghai, Beijing, Hebei, Jiangsu, Zhejiang, Guangdong, and Qingdao. Non-financial enterprises are encouraged to direct cross-border financing into projects that meet established green and low-carbon criteria.

Industry observers note that 2025 marks two symbolic milestones: the 20th anniversary of the “Green Mountains, Gold Mountains” philosophy and the fifth year since China's pivotal announcement of its dual-carbon (peak carbon and carbon neutrality) goals. The pilot program therefore represents not only a policy innovation but also an alignment of domestic green finance mechanisms with international markets.

Experts underscore that the green foreign debt pilot signals the deepening of China's green finance policies. By attracting lower-cost international capital, the program aims to support high-quality enterprises in developing green and low-carbon projects. According to a senior researcher at a major state-owned bank, the policy allows eligible projects to occupy a smaller proportion of the enterprise's total cross-border financing risk-weighted assets, effectively raising the ceiling for cross-border green investments.

Moreover, banks directly handle foreign debt registration, streamlining the process and enhancing the accessibility of green financing. Li Zhiqing, Executive Director of Fudan University's Green Finance Research Center, observes: “Achieving China's low-carbon transition and dual-carbon targets requires massive capital. Issuing green bonds overseas provides enterprises with broader funding sources, meeting both academic calls and corporate needs.”

SAFE emphasizes that the pilot will maintain a careful balance between openness and security, ensuring that cross-border financing contributes effectively to the high-quality development of the real economy.

While corporate overseas bond issuance has become an important financing channel, structural challenges remain. Analysts highlight that some enterprises have uneven credit ratings, modest revenues, and limited profitability, yet seek disproportionately large foreign debt volumes. This mismatch can increase systemic risk. Other constraints include concentrated issuer structures, limited participation from emerging industries or high-end manufacturing, and low adoption of currency or interest rate hedging instruments, which can diminish the efficiency of foreign debt usage.

The green foreign debt pilot is expected to mitigate these structural inefficiencies by steering capital toward low-carbon projects, thereby optimizing the composition and utility of corporate foreign debt.

The pilot program provides clear guidance for enterprises on utilizing cross-border financing for green initiatives, potentially lowering financing costs while offering international investors attractive ESG-compliant assets. The initiative also aligns domestic green finance standards with international norms, a process reinforced by China's dual-track strategy that references both domestic and global principles. This alignment enhances transparency, credibility, and international recognition of Chinese green bonds.

A senior APAC investment officer at a foreign bank notes: “Green foreign debt pilots help elevate Chinese corporate reputation globally. Enterprises with international ambitions can signal adherence to climate and environmental stewardship, which resonates strongly with global investors.”

Historical practice demonstrates tangible benefits. In October 2022, a gas company in Bazhou, Xinjiang, successfully raised RMB 3 million in foreign debt from a Macau-based bank, saving nearly RMB 20,000 in financing costs while fulfilling day-to-day operational needs.

Beyond cost efficiency, the pilot encourages enterprises to channel foreign debt toward innovation, emerging industries, high-end manufacturing, Belt and Road projects, and international capacity cooperation, reflecting a holistic approach to sustainable economic growth.