One of the persistent barriers to accelerating the Association of Southeast Asian Nations (ASEAN) energy transition is the high cost of financing. This challenge is driven by perceived investment risks, a shortage of bankable green projects, and ongoing macroeconomic headwinds. In a recent interview with The Business Times, Dr. Ma Jun, former chief economist of the People's Bank of China and a central architect of the country's green finance ecosystem, shared his insights on how yuan-denominated debt could serve as an underutilized lever for lowering capital costs and deepening China-ASEAN green collaboration.
The Case for Yuan-Denominated Debt
The core of Dr. Ma’s argument rests on diverging monetary policies. China has been easing its policy to support economic growth, holding its benchmark rate near 3%. This stands in contrast to the US Federal Reserve’s rate of approximately 3.75%, and is well below regional benchmarks such as Indonesia’s 5.75% and the Philippines’ 4.75%. Even when compared to lower-rate markets like Malaysia (2.75%), Dr. Ma notes that intense competition among cash-rich Chinese banks further compresses effective lending margins.
According to Dr. Ma, ASEAN issuers who raise capital in China’s market can significantly cut funding costs, making green projects more financially viable. These savings remain substantial even after accounting for currency-hedging costs.
Aligning Financing with Supply Chains
The logic for utilizing yuan debt is particularly sharp for green and transition projects, which typically rely on Chinese vendors due to China’s dominance across the clean-energy supply chain. Dr. Ma frames the issue clearly: borrowing dollars at 6% only to convert them into renminbi to purchase Chinese equipment makes little financial sense when borrowers can access renminbi directly at 3%.
He points to Pakistan’s inaugural sovereign panda bond as a proof of concept. The bond, valued at approximately 1.8 billion yuan (US$258 million), was priced at a historically low 2.5% coupon and oversubscribed more than fivefold, with proceeds earmarked for green and sustainable infrastructure.
Despite these advantages, adoption remains thin. A 2024 report by the International Capital Market Association (ICMA) found that only around 11% of international bonds from Asian issuers were yuan-denominated, compared to 67% in US dollars. Dr. Ma attributes this discrepancy to the market’s novelty rather than any structural obstacles, suggesting that it will only take a handful of “first movers” in ASEAN to normalize the practice.
Mitigating Risks and Fostering Private Investment
Dr. Ma does not dismiss the risks associated with this approach. Concerns regarding over-reliance on Chinese financing are real, though he contends that China-ASEAN relations are less geopolitically charged than other bilateral dynamics. His preferred safeguard is structural: emerging markets should focus on improving their investment environments to attract private-sector capital. This approach ensures that financing flows to private companies, thereby avoiding additions to sovereign debt burdens.
Expanding Technological Collaboration
Beyond debt financing, Dr. Ma outlines complementary avenues for collaboration, specifically the deployment of Chinese solar, battery storage, hydrogen, electric vehicle (EV), and waste-treatment technologies across the region.
He highlights hydrogen as a potential “moving grid,” which could be produced from affordable solar power in Malaysia and Indonesia and subsequently shipped to demand centers like Singapore. Furthermore, ASEAN’s abundant biomass and untreated waste could be utilized to gradually displace coal-fired power generation. Dr. Ma emphasizes that these technologies are already bankable and can be deployed through the private sector without the need for government guarantees.
Navigating Geopolitical Complexities
The remaining wildcard in this transition is geopolitics. Companies in Southeast Asia that depend on Chinese technology have previously been caught in the crossfire of US-China tariffs, notably within the solar manufacturing sector.
Dr. Ma expresses hope that as trade policies stabilize, goods with substantial regional value-add (at least 40%) will be treated as ASEAN products rather than Chinese re-exports. He also notes that rising domestic demand within the region is steadily reducing the relevance of the US market to China-ASEAN clean-energy ties.
Based on the original article: “Asean can lower cost of green transition by yuan debt: China’s green finance veteran,” by Janice Lim, The Business Times, 7 July 2026.
Full article: https://www.businesstimes.com.sg/esg/asean-can-lower-cost-green-transition-yuan-debt-chinas-green-finance-veteran?ref=author