China's environment watchdog is to draw up a blacklist on high-energy consuming and polluting industries that will effectively ban them from obtaining bank loans.

A new government policy requires the State Environmental Protection Administration (SEPA) to regularly hand over lists of heavy polluters to the People's Bank of China, or China's central bank, and the China Banking Regulatory Commission.

Based on the information, companies that fail to pass environmental assessment or to implement China's environmental protection regulations are disqualified from getting loans from any bank or financial institution.

Companies that already have loans, but are later discovered to have violated environmental protection regulations will have their loans called in, according to the so-called "green credit policy".

The SEPA had already submitted to the financial institutions a blacklist of 30 companies that had violated environmental rules, said SEPA's vice-director Pan Yue on Monday.

"Administrative means cannot permanently rein in the deteriorating environmental situation in China, so we should make more use of economic levers," Pan said.

"Increasing the fund-raising costs for heavy industries and even cutting off sources of credit for companies that seriously violate the laws has become an urgent need for curbing their investment impulse," he said.

China's deteriorating environmental situation had spurred the government to find solutions.

Pan said the SEPA would join with the Ministry of Finance, the China Insurance Regulatory Commission, and the China Securities Regulatory Commission to work out other economic policies to promote environmental protection.

(Xinhua News Agency July 31 2007)