The “Closing the Gap” report underscores China’s leading role in combating climate change but highlights the need for significant funding to reduce emissions from major polluters, particularly in energy-intensive sectors. While green finance has made strides, the report emphasises the crucial role of transition finance in supporting the shift to sustainability. Challenges include a funding gap for private companies and a global lack of standardisation in transition finance. Global frameworks offer direction, but China is forging ahead with its transition finance initiatives. Crucial guidance from the People’s Bank of China is expected, focusing initially on carbon-intensive industries. Recommendations include swiftly developing financial institutions’ frameworks, defining pathways for phasing out coal-related projects, and broadening transition finance frameworks to encompass various industries. By addressing these challenges, China can solidify its leadership in climate finance and achieve a more sustainable future.