CAN THE REFORM OF GREEN CREDIT POLICY PROMOTE ENTERPRISE ECO-INNOVATION? A THEORETICAL ANALYSIS

The weakness that China's traditional credit fails to effectively limit enterprise emissions has become increasingly evident. Although the industry-oriented green credit policy has achieved certain effects on environmental per-formance through the differentiated resource allocation of the industries, bank-ing financial institutions have the ambiguity in the definition of the credit object and the characteristics of profit maximization, which cannot achieve the essential purpose of green credit sustainably. Hence, we propose a new eco-innovation-oriented green credit policy. We prove theoretically that the new green credit is feasible and can be used as an exogenous driver for im-proving enterprises' eco-innovation. Contrasting with traditional credit, the newly proposed credit policy is an expansionary monetary policy, which has the characteristics of expanding credit lines and differential interest rates. Uti-lizing evolutionary game theory, we calculate the evolution stability conditions of green credit and eco-innovation. The results show that the key to green credit to maintaining sustainable development is the return on investment due to eco-innovation. Our theoretical analysis also reveals that environmental benefit-cost ratios and adjustment cost parameters of different assets are the important factors for green credit.