China’s green bond market has surpassed that of its Western counterparts for the first time this year, marking a significant shift in global sustainable finance as Beijing accelerates its adoption of environmentally aligned funding amid mounting political and regulatory pressures in the United States and Europe.
According to Financial Times calculations based on data from the London Stock Exchange Group, China issued a record $70.3 billion in green bonds in 2025—covering both certified issuances and those aligned with the Climate Bonds Initiative. This milestone has positioned China ahead of other major economies in financing the transition to clean energy, at a time when environmental, social, and governance (ESG) efforts face increasing backlash in the U.S. under President Donald Trump and growing fatigue across European markets.
China accounted for over 17% of global green bond issuance this year, while the United States represented just 3%.
Declining Momentum in the U.S. and Europe
Alicia García-Herrero, chief economist for Asia-Pacific at Natixis, noted to the Financial Times that “the U.S. is no longer present, and Europe is struggling—there is a clear sense of fatigue across the ESG landscape.”
Green bonds, issued by companies and sometimes governments to finance environmentally friendly projects, have grown in popularity over the past decade, especially in Europe. Their appeal stemmed from investors aiming to strengthen their ESG credibility, often rewarding issuers with lower borrowing costs. However, shifting political attitudes—particularly under Trump—have dampened enthusiasm within the financial sector, affecting markets even beyond the U.S.
Crystal Jing, head of ESG research for Asia at BNP Paribas Asset Management, emphasized that “China is now the only major market significantly scaling up its efforts.”
China’s Massive Clean Energy Expansion
Beijing has committed to reaching peak carbon emissions by 2030 and achieving carbon neutrality by 2060. It currently builds nearly three-quarters of all new wind and solar power projects globally and leads in hydropower capacity, renewable energy transmission and storage technologies, hydrogen infrastructure, and the construction of nuclear power plants.
This rapid expansion has become a major source of economic growth as China continues to confront a property-sector downturn. Yet most large-scale sustainable projects are not financed through green bonds. According to the People’s Bank of China, outstanding green loans in the country total 43.51 trillion yuan ($6.1 trillion), compared with just 2 trillion yuan ($280.5 billion) in outstanding green bonds. Many green projects are developed by small and medium enterprises that lack credit ratings and therefore have limited access to the bond market.
Expectations for Further Growth
Economists expect China to further increase its green financial instruments to meet future energy-transition needs. Robert Gilhooly, senior emerging markets economist at Abrdn, estimates that China will need to add around 6,000 gigawatts of new power capacity over the next 25 years, costing between $12 trillion and $14 trillion.
García-Herrero explained that China’s issuance of relatively low-cost green bonds is likely to rise, as profit margins in industries such as solar manufacturing rapidly shrink. “They simply lack organic financing sources, meaning they must rely on the market more than ever,” she said.
Building China’s Green Bond Market
The People’s Bank of China launched the green bond market a decade ago. Ma Jun, former chief economist at the central bank and current head of the Institute of Finance and Sustainability in Beijing, explained that large-scale infrastructure projects often require long-term financing—something banks have historically been reluctant to provide. Creating a green bond market helped make up for this “maturity mismatch” within the banking system.
Alan Neef, assistant professor at ESSEC Business School in France, noted that China’s ability to provide inexpensive financing allows its green projects to thrive even when profitability lags behind that of traditional ventures or similar projects abroad. Western governments cannot offer the same level of support due to concerns over political neutrality and central bank independence.
“In China, there are no such constraints—the central bank can openly support these initiatives,” Neef added.
Limited Foreign Participation
China has long sought to attract foreign capital to its green bond sector, but international investors remain cautious. Concerns persist about environmental transparency, the secondary market’s liquidity, and broader risks tied to China’s financial system.
Angela Zhang, chief economist and head of research at CGS International Securities, noted that most buyers of Chinese green bonds are domestic institutions, such as commercial banks, insurance companies, and asset managers.
“Local players dominate the market,” she said, underscoring a dynamic that may persist even as China’s green finance ambitions continue to expand.
