Many economists, politicians, and central bankers have been studying, theorizing, and debating the potential role central banking could play in the global effort to promote decarbonization and address climate change.
There is little consensus, if any. However, the People’s Bank of China (PBOC) has eschewed debate and quietly made efforts to green China’s financial system for some time. Last year, in the wake of the Xi Administration’s 30/60 pledge.
PBOC efforts to foster more climate-friendly lending intensified. In 2021, the PBOC continued to take conventional actions but added measures that diverged from central bank orthodoxy and embraced policy experimentation.
While the PBOC operates within China’s unique economic, political, and financial environment, it would be a mistake to overlook these policies. Apart from its conventional measures, the more active measures the PBOC is taking to steer credit into decarbonization efforts can provide insight into central bank efforts in the rest of the world.