China Solidifies Role as Asia's Green Finance Leader Amid Worsening Green Tech Profitability

Alicia Garcia-Herrero of Natixis CIB identifies China as the leader of Asian green finance, driven by power grid expansion and heavy industry transition needs.

By: AXL Media

Published: Feb 23, 2026, 4:19 AM EST

Source: Finews Asia

Strategic Expansion of China’s Green Debt Market

The Asia Pacific green finance sector has seen a robust rise since 2024, largely propelled by China’s aggressive issuance of fixed-income instruments. While capital markets currently finance only 30 percent of energy transition activities in the region, 80 percent of these deals are structured as fixed-income instruments. China’s annual funding of $200 billion significantly overshadows other notable markets in the region, which typically average around $20 billion each. Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis CIB, characterizes China as the "star of green finance in Asia," noting that the country’s contribution is essential to bridging the regional emissions-to-funding gap.

The Profitability Crisis in Green Technology

A primary driver for the increased demand for external green financing is the worsening profitability within China’s own green tech sector. The industry is currently facing a significant funding gap caused by irrational competition and growing overcapacity, which has led many renewable energy firms to curb capital expenditure (capex) to protect shrinking margins. This decline in self-financing capability has forced companies to turn toward external green finance markets to sustain operations. Analysts suggest that until corporate profits in the green tech industry recover, the demand for external debt instruments will continue to climb, creating a unique entry point for global investors.

Infrastructure Modernization and the Power Grid Mandate

The second major catalyst for China’s green finance surge is the massive capital requirement for power grid modernization. To mitigate the "curtailment" of renewable energy—the idling of capacity when demand is low—the Chinese government has initiated a new round of ultra-high voltage (UHV) transmission construction. These projects aim to improve grid efficiency but carry immense construction costs. A notable indicator of this trend is the State Grid Corporation, which saw its bond issuance jump by 250 percent to $44 billion in 2024, maintaining its status as the world’s largest green bond issuer. As UHV construction accelerates, the volume of green bonds is projected to stage an even stronger rise.