China has unveiled an updated and consolidated green taxonomy in a significant move to support its net-zero transition goals and reduce regulatory fragmentation that has complicated green finance reporting in the past. The new catalogue, which takes effect in October 2025, replaces two separate lists previously used for bonds and loans, although it does not extend to equities.
Jointly issued by the People’s Bank of China (PBoC), the National Financial Regulatory Administration, and the China Securities Regulatory Commission, the revised taxonomy defines eligible green and environmentally sustainable activities across a broad range of industries. The measure aims to improve clarity, lower compliance costs for financial institutions, and better align financial markets with China’s decarbonisation ambitions.
“The consolidation will help improve efficiency and is expected to ramp up funding either through the credit or bond market,” said Ting Su, sustainable research associate at the World Resources Institute.
Xie Wenhong, head of the China programme at the Climate Bonds Initiative (CBI), noted that the update marks a critical step towards enabling the financial sector to more effectively support the real economy’s green transition. “The updated taxonomy expands coverage to include climate resilience, methane abatement, and for the first time, passenger rail — a sector with low-carbon potential long advocated by CBI,” he added.
The catalogue also broadens the scope of green finance to include trade and consumption. Green trade provisions support the import and export of environmentally friendly technologies, while the inclusion of green consumption is intended to drive demand-side behavioural change. This could lead to the introduction of green consumer loans and mortgages, incentivising both innovation and sustainable production.
However, challenges remain. There is still some overlap between the new taxonomy and existing transition finance frameworks, which could create confusion or lead to double-counting. “More clarity is needed for market participants on how to address these ambiguities,” Ting said.
She also emphasised the importance of further policy support to stimulate the market. “While the taxonomy is a huge milestone, incentives will be key. The green premium in China remains lower than in other developed markets, so the creation of targeted policy incentives based on the catalogue will play an important role.”
The move follows China’s participation in a joint green taxonomy initiative with Singapore and the EU in 2024, aimed at facilitating cross-border green finance and harmonising standards globally.
