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Growth, Concentration, and Convergence of Green Credit in Chinese Commercial Banks: Evidence from a Bank-Level Panel, 2012-2023

Author(s)

Mingyao Sun

Affiliation(s)

Supply Chain Management, Xi'an Jiaotong-Liverpool University, Suzhou, China

Abstract

Green credit is the largest channel of green finance in China and a core tool for the country's carbon peaking and carbon neutrality goals. This paper studies how green credit has developed across Chinese commercial banks from 2012 to 2023, the year range that follows the release of the Green Credit Guidelines. We build a bank-level panel of 231 banks and 815 bank-year observations from disclosed annual reports. We document three results. First, green credit grew quickly. The total green credit balance in the sample rose from 1.60 trillion yuan in 2012 to 22.58 trillion yuan in 2023, a compound annual growth rate of about 27 percent, and the share of green credit in total loans rose from 3.9 percent to 13.4 percent. Second, the market is still concentrated but is slowly broadening. The six large state-owned banks held about 85 percent of green credit in 2012 and about 79 percent in 2023, while the Herfindahl-Hirschman Index fell from about 2030 to about 1420. Third, green credit ratios across banks show beta convergence. Banks that started with low green credit ratios grew faster, with an estimated convergence speed of about 14 percent per year and a half-life near 4.6 years, while dispersion first widened and then narrowed after 2020. A positive link between bank size and green credit intensity appears in the cross-section but disappears within banks over time. The findings suggest that the green transition of Chinese banking is real and is spreading beyond the largest banks, but that large state banks remain the anchor of the system. We discuss policy steps to support smaller and inland banks.

Keywords

Green Credit; Green Finance; Commercial Banks; Market Concentration; Convergence

References

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