BEIJING, June 6 (Xinhua) — In pursuit of greener growth, China is steadily incorporating resources and environmental factors into the market framework as tradable production inputs, ensuring their value is more visible across the economy.
The latest move came in late May, when Chinese authorities unveiled a high-level guideline to accelerate the development of trading markets for carbon emission rights, water utilization rights, and pollution discharge permits.
According to the guideline, by 2027, China will have established a basically complete carbon emission and water trading system, and a more well-functioning trading system for pollution discharge rights. The guideline also envisions more vibrant markets, better price formation, and stronger support for national environmental goals through efficient flows and allocation of resources and environmental factors.
The latest reform builds on the principles laid out in October 2022, when Chinese leadership pledged to improve the system for market-based allocation of resources and environmental factors, and accelerate the R&D, promotion, and application of advanced energy-saving and carbon emission reduction technologies.
Analysts note that China faces rising pressure from limited per capita resources, tightening environmental constraints, and growing demand driven by rapid industrialization and urbanization. As a result, the role of resources and environmental factors as essential economic inputs has become increasingly prominent, making efficient, market-based allocation a pressing national priority.
“Resource scarcity and limited environmental carrying capacity are fundamental conditions in China,” said an official with the National Development and Reform Commission (NDRC) in an interview with Xinhua, highlighting the urgency of using market mechanisms to break resource and environmental bottlenecks.
Over the years, China has laid important groundwork for the trading of resources and environmental factors, including establishing a nationwide carbon trading market, voluntary greenhouse gas emission reduction market, and water exchanges. Pilot programs for pollution permit exchanges have been rolled out in 28 provincial-level regions, demonstrating the viability of market-based mechanisms.
Nevertheless, despite these notable advances, the NDRC official pointed out that challenges persist, as China’s market-based system for allocating resources and environmental factors is still in its early stages. This system has been hindered by incomplete regulatory frameworks, a limited range of trading participants and mechanisms, as well as insufficient policy coordination and data sharing.
The new guideline, the official added, is expected to promote the notion that “resources and environmental factors carry value,” guiding their orderly flow, optimized allocation, and more efficient use, thereby fostering green, low-carbon development and supporting the growth of new quality productive forces.
Under the reform plan, China seeks to promote a unified framework for quota allocation and trading rules, while preserving the flexibility needed to address the specific nature of different environmental rights and major policy transitions.
Beyond regulation, the document also called for greater involvement from financial institutions. Financial entities are encouraged to develop green financial products, such as loans, insurance, and bonds, linked to resources and environmental factors.
Experts have hailed the policy as a landmark step towards systemic ecological reform in China. Wang Yi, a researcher at the Chinese Academy of Sciences, described it as a “top-level design” to fix overlapping compliance and double counting, adding it marks a shift toward more integrated, system-level ecological governance.
Li Zhong, deputy director at the Energy Research Institute under the Academy of Macroeconomic Research, said the reform reflects China’s regional diversity, noting that the document explicitly calls for a phased approach, adjusting market structures according to local environmental characteristics and the readiness of market conditions.
While many local governments have launched pilot exchanges for carbon, water, and pollution rights, the new guideline emphasizes the need to align regional efforts under a national framework to improve allocation efficiency and market consistency.
In the carbon market, the country plans to expand its carbon market coverage, diversify trading products, and strengthen coordination with voluntary reduction schemes. Water-rights trading will extend across provinces in key river basins, incorporating conserved water from industrial and agricultural use. Pollution rights will see pilot cross-regional trading within shared watersheds.
Looking ahead, experts emphasize that accurate data, standardized trading platforms, transparent information disclosure, and enforceable oversight are all critical to building a well-functioning market for resources and environmental factors.
“Data integrity and legal safeguards are critical,” Wang Yi noted, adding that the development of a market-based system for resources and environmental factors is an evolving process that requires continuous adjustment and careful monitoring. ■
