Macroprudential Policy for a Low Carbon Economy: The Case of Cross-Border Funding in China

Isabelle Jiani Zheng and Pierre Monnin | 24 April 2026
Monetary, Policy Briefs | Tags: China, Decarbonization, Macroprudential Policy

In August 2025, the State Administration of Foreign Exchange (SAFE) announced a pilot project for green foreign debt financing to expand Chinese firms’ access to foreign funding for green or low-carbon transformation projects. Such cross-border funding of low-carbon investments has become increasingly important around the globe. China’s pilot offers a promising example of how macroprudential policy can be adapted to ease constraints on such flows without jeopardizing its primary financial stability objective.

The scheme moderately relaxes firms’ constraints on foreign borrowing set in China’s macroprudential framework. By the end of 2025, it had already catalyzed more than 300 million USD in cross-border funding to green and low-carbon transformation projects. So far, firms seem to have relied more on loans than on debt securities to secure cross-border funding in this pilot. This probably reflects a faster implementation of the pilot for loans than for other debt instruments, such as offshore bonds. We expect debt issuance for this pilot to grow significantly once issuance processes catch up.

Clearly, supply and demand for cross-border transition investments are driven by several factors, such as project profitability and the international interest rate environment. While these underlying factors are critical, easing macroprudential constraints can play a meaningful role – even more so when combined with broader policy support.

Understanding how macroprudential frameworks can be designed and adapted to support cross-border flows is therefore an increasingly pressing question for policymakers. This paper distills the lessons from China on how to do so.

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Monetary, Blog | Tags: Central Banks, China, Economic Growth, Financial Stability
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Isabelle Jiani Zheng

Isabelle Jiani Zheng is a Fellow at CEP. Her work focuses on monetary policy and financial regulation, with a particular emphasis on China. Prior to joining CEP, she finished her PhD at the University of Zurich (UZH) focused on sustainability-related risks in the real economy and the financial system. In that context, she has contributed to the development of climate transition risk metrics and to their application, inter alia, for “A Carbon Risk Assessment of China’s Overseas Energy Portfolios”. She holds a M.Sc. in Economics from UZH and a Bachelor’s in Finance from Fudan University in Shanghai, China.

Pierre Monnin

Pierre Monnin is a Senior Fellow at CEP and a Visiting Professor in Practice at the Centre for Economic Transition Expertise at the London School of Economics and Political Science. He works on central banking, monetary policy, and financial regulation, focusing on their environmental and social sustainability interdependencies. Before joining CEP, he worked for the Swiss National Bank (SNB) in various roles for ten years, as well as in the financial industry.