China has one of the largest ecological governance systems in the world, including eco-compensation regulations, an extensive green finance framework, and environmental rights trading. The Regulations on Ecological Protection Compensation (2024) and the Ecological and Environmental Code (2026) together form a legal architecture that few jurisdictions can match.
All in all, China's efforts seem to be working. It has established a national park system covering roughly 230,000 km², slightly smaller than the entire size of the UK, protecting habitats for species such as the giant panda and Siberian tiger. Forest cover increased from about 12% in the early 1980s to over 24% by 2023, largely due to large-scale tree-planting and forest protection programmes.
Satellite observations indicate that China accounted for about 25% of the global increase in leaf area from 2000–2017, despite having only about 7% of the world's vegetated land. Central fiscal transfers for ecological protection compensation exceeded US$30 billion in 2024, with a green loan book estimated at more than US$6 trillion.
China's numbers are always big; there is always more to be done, and there are inevitable complexities when one examines the small print. But the simple truth is that China's recent progress in restoring and protecting nature within its own national boundaries is impressive.
So why has a partnership of four organisations—the Beijing-based Institute of Finance and Sustainability, the Munich-based The LandBankingGroup, and the Geneva-based Morphosis, in association with the Asian Infrastructure Investment Bank—set out to determine whether China needs 'nature markets'?
After all, as the old adage goes, 'if it is not broken, don't try to fix it’.
Indeed, far from promoting nature markets, the partnership is carefully exploring whether a market mechanism can not only complement existing efforts, but can add value more effectively than strengthened existing, largely state-driven and paid-for, approaches.
The work is ongoing, involving engagement with policymakers, regulators, national parks, scientific experts, and businesses including financial institutions. Alongside this, we are doing deep dives through specific pilots, as well as noting and learning from pilots and other research being advanced by others in China, including the Institute of Public and Environmental Affairs (IPE) and the Asian Development Bank (ADB), and broader inquiries from the likes of the China Council for International Cooperation on Environment and Development (CCICED).
Lastly, we are benefiting from the extensive experience brought to the table by the leading international standard-setter, the International Advisory Board on Biodiversity Credits (IAPB), where I am honoured to be a Steering Board member and co-Chair of its Equity and Inclusion Standards Working Group.
The challenge is clear and of great relevance internationally, partly because what China does impacts us all, but also because of the framing question of whether nature markets can make a meaningful difference in an institutionally intensive context. The work to date does point to the possibility that nature markets could contribute to nature conservation and restoration in China in three ways:
(i) serving as an integrator of diverse sources of 'demand' for nature investments; both public and increasingly private.
(ii) enabling the systematisation of the necessary layers of data and metrics from the science through to the balance sheet.
(iii) incentivising change across businesses and markets towards nature-positive design, behaviour, and outcomes.
The jury is out, but ongoing work and deliberations over the next year are likely to inform the direction that China will go. Those with an interest, and those with a view, take note.
This blog is written by Dr Simon Zadek, Managing Partner at Morphosis, and Convenor of the China Nature Markets Initiative. It has benefited from insights of the partners of the initiative, with special thanks to Jiangfang Zeng, Researcher at the Institute for Finance and Sustainability, the lead co-author of a forthcoming paper, 'China's Institutional Foundations for Nature Markets': AIIB, IFS, Morphosis, TLG (2026, forthcoming).
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