October 11, 2023/Fitch Ratings

China’s decarbonisation drive will require large investments that Fitch Ratings believes corporate-style bank loans and public funds will not be able to meet, which will spur development of other financing methods to close the funding gap.
 
Non-recourse project finance is a tool that is typically used for energy projects across the world as they generate long-term contracted cash flows that provide stable and predictable sources of funds for loan repayment. However, such deals are not common in China, both in the domestic market as well as offshore, although offshore non-recourse financing deals have been closed by projects in Indonesia, Vietnam and India.
 
China’s top-down economic planning approach, the dominance of state-owned enterprises in power market and SOEs’ easy access to domestic funds make project financing less attractive. However, project financing and other methods may be needed if China is to increase renewables capacity to meet its decarbonisation goals. China aims to reach emissions peak in 2030 and net-zero emissions by 2060, and be a world leader in green technology.