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The origin of greenium in China’s bond market: green preference or government support?

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  • Ying, Qianwei
  • Peng, Xinyue
  • He, Siyi

Abstract

This study examines the determinants of greenium in China’s bond market. By analyzing green bonds issued from 2016 to 2024, our empirical results demonstrate that greenium primarily arises from government-backed labels. Mechanism tests show that labeled bonds secure fiscal subsidies and tax incentives, reflecting these bonds will bring about more government-oriented resources. Heterogeneity analysis indicates that labeled green bonds exhibit a significant greenium particularly after the dual-carbon policy implementation and when the bonds are held by institutional investors. Further test using a difference-in-difference approach reveals that the issuance of labeled green bonds can also narrow the spreads of regular bonds, which suggests that government support obtained through labeled green bonds helps mitigate the credit risk of issuers. This study highlights government support as the dominant force shaping greenium in China, which expands the research on green bond pricing.

Suggested Citation

  • Ying, Qianwei & Peng, Xinyue & He, Siyi, 2025. "The origin of greenium in China’s bond market: green preference or government support?," Finance Research Letters, Elsevier, vol. 85(PC).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pc:s1544612325013133
    DOI: 10.1016/j.frl.2025.108055
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    1. Keum, Byounguk, 2025. "Do Stricter Green Standards Bring Higher Greenium? Evidence from Korea," Finance Research Letters, Elsevier, vol. 85(PE).

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