“The first Chinese advantage is cheap finance. In April 2022, a measure known as the ten-year sovereign yield spread between U.S. and Chinese government bonds became positive, meaning that China can raise domestic capital more inexpensively than the United States can. As sovereign lending sets the floor for all downstream lending, Chinese policy banks can extend loans to the Global South at rates Western institutions cannot match…”
“China does not merely bring cheap finance and electrotech to the energy transition. It also brings contractors, export credit, policy banks, and, increasingly, RMB liquidity and payment infrastructure. China provides financing facilities, which finance individual projects, as well as a system—the lender, the vendor, the currency, the equipment, and the route by which payment moves. This approach transforms the lending advantage into a systems advantage.”
“In the context of clean energy capital costs, the emergence of the digital yuan is important because it brings programmability—the ability to define, in advance, how money moves and what it can be used for. China’s central bank, as cited in central bank material, is looking at how the e-CNY can be used to establish ‘smart contracts.’ For example, once the terms of a loan are set, they can be embedded in the code that determines how and when the digital currency can be used. Contract enforcement is automated; if the terms are not met, the system automatically denies payments. In China, a version of this was already tried at home. During the COVID-19 pandemic, the government distributed consumption-restricted digital yuan in Shenzhen and other cities. These coupons were programmable only for designated merchants within defined time windows.”
“For climate finance, this changes the bargain. A loan agreement can require that funds should be used to purchase eligible Chinese solar equipment only. A payment corridor can route that payment, and a programmable payment system can make the condition binding…”