People observe social distancing while gathering to watch the Dubai fountain show, which resumes as the Gulf emirate emerges from a lockdown imposed due to the COVID-19 pandemic, on June 5. Photo: AFP

A bell tolling ceremony for the first green bond issued by a Chinese bank in Dubai, United Arab Emirates (UAE) was held Tuesday at the Nasdaq Dubai exchange. 

The two green bond issues, worth $700 million and $500 million respectively, were issued by China Construction Bank (CCB). 

"This issuance of CCB's green bonds in Dubai is the first issuance of such bonds by a Chinese bank in a Middle Easter country," explained Cao Lei, senior economist of CCB Research Institute. 

"They are supported by the Belt and Road Initiative special bonds of China and it also fits well with the UAE's strategy of supporting clean energy and green economy too," Cao told the Global Times on Wednesday.

Funds from the green bonds will be used to subsidize green projects that meet the required conditions, including green areas of climate change mitigation, natural resource depletion restraint, biodiversity conservation, and pollution control, Chinese analysts say.

"This is the first time for a Chinese bank to issue green bonds in Dubai, which will further support the cooperation between China and the UAE to put into practice sustainable and green development as responsible major countries," Deng Yu, senior research fellow of Atlantis Financial Research Institute, told the Global Times on Wednesday.

Of the two bonds, $700m will mature in 2025 with a coupon rate of 1.25 percent, while $500m will mature in 2023 with a coupon rate of 1 percent. The issue has received pre-issuance certification from the Climate Bond Initiative, an organization working on mobilizing the $100 trillion bond market for climate change solutions.

"Chinese entities issuing green bonds overseas will enrich the channels for cross-border financing of green capital," said Cao.

It is also an important practice for CCB, one of China's four largest state-owned banks, to better prevent financial risks and participate in international competition, he added.

According to Dubai International Financial Center, Chinese Banks' holdings in the center have risen from $11 billion to $33 billion between 2014 and 2018. China's banking sector has grown steadily in Dubai, said the Economic and Commercial Office of the Chinese Embassy in the UAE.

The timing and conditions for Chinese institutions to issue green bonds are improving, Deng noted.

According to NASDAQ Dubai, there have been 19 Chinese bonds issued at the exchange so far, worth $11.3 billion in total.

"In future, more Chinese institutions will choose to issue bonds overseas, to expand financing channels. Meanwhile, it will help overseas funds integrate into China's financial market thanks to the integrated bond issuance standards and environment," Deng added.