Ms. BAI Yunwen, Greenovation Hub, Tel: +86 18601132863
Mr. Yu Xiaogang Green Watershed, Tel: +86 1388850512
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51 Chinese environmental NGOs, including BankTrack members Greenovation Hub and Green Watershed, have sent an open appeal letter to the China Banking Regulatory Commission (CBRC), calling upon the commission to reject the establishment of the China Coal bank.
Recently, there has been wide media coverage on the possible establishment of the China Coal Bank. According to the official website of the China Coal Bank, 15 coal firms including Shanxi Coal International Energy Group and Jincheng Anthracite Group were led by JinBen Investment Enterprise to participate in establishing the bank, which will become the country's largest private bank and first resource-focused industry bank. The key objective of this bank will be to promote the development of the coal industry in China, optimize the coal chemical industry structure and support Chinese coal enterprises financingoverseas investments in coal.
The appeal letter points out that "China Coal Bank is against national strategies on ecological civilization construction, energy conservation and emission reduction, atmospheric pollution prevention and control, as well as 'Green Credit Directives' Policies". It also indicates that "the production and consumption of Coal is a main cause for environmental pollution and greenhouse gas (GHG) emissions".
The 51 Chinese NGOs also indicate that establishing a resource-focused bank is not in accordance with the principal of optimizing financial resources allocation. As an industry under key national control, the coal industry is bound to reduce its production capacity. Enterprises with polluting or outdated technology will be eliminated and restructured. This brings enormous policy risks to the China Coal Bank. In addition, the China Coal Bank will use coal as the guarantee for deposit. This on one hand conflicts with the national public ownership of all coal resources, and on the other hand increases the bank's credit risk.
Once there is a break in the capital chain for coal enterprises, the bank is left with a large amount of problematic debts. This will lead to distortions of the coal price. Based on the inevitability of this price distortion due to opportunistic practices, coal enterprises may mine excessively in order to liquidate without any consequences. All of these could trigger immoral behaviors against market principle, while it will be extremely hard for regulators to monitor this risk.
The NGOs signing the letter therefore appeal to the China Banking Regulatory Commission (CBRC) and other relevant regulatory institutions to demonstrate their responsibility to the state and society and reject the proposal for the establishment of China Coal Bank by law.
Bai Yunwen, from Greenovation Hub, one of the co-signing NGOs, said: "Allowing private capital into the banking industry is an important part of financial reform and will promote the diversification of banking ownership structure and improve the overall efficiency of the financial markets. However, establishing a resource-focused China Coal Bank not only increases the difficulty to manage financial risks, it is also at odds with national development policies to address CO2 reduction and air pollution control."
She continued: "The establishment of the China Coal Bank would be in direct contradiction with recent policy moves of key international financial institutions. Global giants as the World Bank, European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and US EXIM Bank are all making moves to retreat from the sector. In addition, the United States, the United Kingdom and five Nordic countries have publicly announced that they will no longer support the construction of coal power plants abroad. China should follow suit."