Abstract

In the context of global initiatives to mitigate climate change and promote sustainable development, green finance has emerged as a critical component in the transformation and modernization of China’s financial system. Among its various instruments, green credit serves as the cornerstone of commercial banks’ green finance portfolios, playing a pivotal role in channeling capital toward energy efficient and environmentally sustainable industries while facilitating the transition to a low-carbon economy. This study systematically examines the development trajectory and sectoral investment patterns of green credit in Chinese commercial banks from 2018 to 2024. The results reveal that the overall balance of green credit has experienced sustained and robust growth, with financial resources increasingly shifting from traditional sectors such as energy and transportation to emerging industries, including clean manufacturing, energy efficient construction, and circular economy initiatives. Despite this progress, several structural challenges persist, including insufficiently detailed policy frameworks and incentive systems, limited internal motivation and professional expertise within banks, pronounced product and service homogeneity, and inadequate innovation capacity. To address these constraints, the paper proposes enhancing the policy and regulatory framework, establishing a multi-level incentive mechanism, strengthening banks’ strategic orientation and professional competencies, and fostering innovation in green financial products and services. These measures are essential for advancing the high-quality and sustainable development of green credit within China’s commercial banking sector.