Green sovereign bonds, as financial instruments possessing the dual attributes of “sovereign bonds” and “green bonds”, have become an important means for countries to raise funds for ecological and environmental protection and climate change response. China released its “Green Sovereign Bond Framework” in 2025 and issued its first RMB-denominated green sovereign bond in London, marking its formal entry into the global green sovereign bond market. However, the current institutional framework faces several challenges that constrain its sustainable development. Firstly, the regulatory hierarchy is too low. The “Green Sovereign Bond Framework” is merely a policy document, lacking legal binding force, which makes it difficult to effectively protect investors’ rights and interests, particularly undermining the confidence of international investors. Secondly, the management structure is overly centralized, with the Ministry of Finance solely responsible for issuance and management, lacking collaborative participation from specialized departments such as ecology, environment, and energy. This affects the scientific rigor and professionalism of project evaluation and fund utilization. Thirdly, the fund management mechanism is inadequate. The rules for project evaluation and selection are insufficiently clear, potentially leading to inefficient use of funds. Furthermore, flaws exist in information disclosure and external review mechanisms. Disclosure content lacks standardization, and the independence and credibility of external assessments are questionable. Finally, a dispute resolution mechanism is absent, leaving investors without effective recourse in cases of issuer default or “greenwashing” practices. To improve China’s green sovereign bond system, the following measures are recommended: First, enhance the regulatory hierarchy by promoting the enactment of specialized regulations or adding a dedicated chapter to the “Government Bond Management Regulations”. Second, optimize the management structure by establishing a management committee led by the Ministry of Finance with multi-departmental collaboration. Third, improve information disclosure standards by formulating unified reporting norms to enhance transparency and comparability. Fourth, strengthen the external review and evaluation mechanism by clarifying the selection criteria and legal responsibilities of assessment institutions to ensure independence and impartiality. Fifth, establish a dispute resolution mechanism, introducing diversified methods such as international arbitration. Sixth, refine supporting policies, including tax incentives and public education, to create a favorable market environment.