LIMA - China is taking three key steps to reform its financial sector towards green and sustainable finance, a Chinese official said here Thursday.

The first step is to bring private and public money together in sustainable finance, said Yi Gang, deputy governor of the People's Bank of China (PBOC).

China will need to invest 2.4 trillion RMB (377.8 billion US dollars) a year in the green sector, Yi told a panel discussion prior to the World Bank-International Monetary Fund annual meetings on Oct. 9-11.

"However, government resources can only cover 15 percent of this. The rest must come from the private sector," said Yi, adding China will combine its monetary policy, fiscal policy, tax system and pollution control measures to design a positive incentive mechanism to get investment.

The second step is to design a green financial market, Yi said, adding that despite China's having a vast financial sector, its financial structure heavily depends on banks while the insurance and fund segments lag behind.

Therefore, the main goal for China's green financial market will be to ensure that more and more bank lending becomes green, Yi said.

"...[W]e will also work on green bonds, green investment funds, green insurance and carbon trading mechanisms. A green financial market will facilitate (the creation) of green financial instruments to continue sustainable finance in a commercially viable way and maintain private investment," he said.

Thirdly, Yi said, China was calling for international cooperation to tackle common problems such as pollution and other environmental problems.

"Environmental problems and pollution have large externalities. If any one country commits to green finance, it benefits the whole world. These heavy externalities mean that, without global cooperation, the green sector will be under-invested and polluting industries will be over-invested," he said.

Yi looked to the G20 as the right platform to help create a global international standard to promote green bonds and green insurance.

Yi also said that the PBOC's research department and the United Nations Environment Program (UNEP) had formed a green finance taskforce that had made 14 recommendations on setting up China's green financial system.