(Yicai Global) Sept. 4 -- The Chinese government should lower costs of investment and financing for green projects through discounts on loan interest, secured re-loans and the promotion of public-private partnerships, given the current development stage of the national economy, China News Service reported on Aug. 31, quoting Chen Yulu, vice governor of China's state bank, the People's Bank of China.

The same day, the central bank also released a draft paper, jointly written with six national ministries and commissions, offering suggestions to build a financial system for green projects.

China will integrate various special funds for energy preservation and environmental protection initiatives and set up a state-level green development fund, Chen said. Local governments and private investors are encouraged to collaborate on the establishment of regional green development funds, and the central bank will offer re-loans and issue green bonds to facilitate related activities, he added.

The government has also decided to kick off a national carbon market by year-end in order to improve the liquidity and the effectiveness of carbon product pricing on existing carbon markets, Chen said.

Green finance refers to financial services provided for economic activities aimed at enhancing the environment, combating climate change and improving energy utilization efficiency. Financial returns on green finance-backed projects are typically lower than the market average. Therefore, China is trying to lure investors into green finance projects by offering them more incentives.