The national environmental watchdog has sent a blacklist of 30 polluters to leading financial institutions in connection with the country's green credit policy.
The system is aimed at starving notorious polluters of the funds they need to operate.
"The deterioration of China's environment tells that it is not effective to rely on just one department to monitor pollution emissions," said Pan Yue, deputy minister of the State Environmental Protection Administration (SEPA).
"The environmental watchdog needs to work hand in hand with financial policymakers to find ways to punish polluting factories."
On the blacklist, copies of which were given to the People's Bank of China (PBOC), and the China Banking Regulatory Commission (CBRC), the SEPA listed a group of polluters that had failed environmental assessments or to implement green regulations.
As a result, the listed factories will face challenges borrowing money from banks.
Most of the factories were in the paper-making, coking, pharmaceuticals, iron and steel, and brewery industries. Eight polluters were from Heilongjiang Province.
The SEPA, PBOC and CBRC jointly worked out the green credit policy this month. Under it, banks will be stricter about lending to companies that do not pass environmental assessments or fail to implement environment-protection regulations.
By including the environmental records of enterprises in the credit system, the central bank has also alerted commercial banks to the risks of lending money to polluting enterprises that may be shut down for violating environmental rules.
Wang Jinnan, a senior expert at the Chinese Academy for Environmental Planning, said: "The listed plants are small and medium-sized plants, which face more challenges than large companies when applying for loans from financial institutions. The green credit system is a reasonable way to control pollution from the small and medium-sized plants."
"But if large companies were on the list this time, the policy would be more influential and effective."
Pan said that with its current authority, the toughest measure the SEPA could take to tackle the frequent water pollution accidents would be to stop approvals of new projects in certain areas. However, such measures will not stop water pollution.
"So we have to gain some economic leverage to punish polluters," Pan said.
In the first six months of this year, the industrial sector grew by 18.5 percent. The six most energy-consuming sectors grew by 20.1 percent.
Pan said increasing the cost of financing and soaking up their sources of credit were effective ways to slow the growth of energy-intensive industries.
He also said that as a follow-up to the green credit policy, which is also in use in the international community, the SEPA will cooperate with financial institutions to promote a series of green policies on taxation, insurance and securities.
(China Daily July 31, 2007)