Heavy polluting Chinese companies could struggle to secure new loans and subsidies from the government, under new plans designed to help tackle the country's ongoing smog crisis.

 

According to Bloomberg reports, China's Ministry for Environmental Protection last week issued a statement confirming that a new environmental credit rating system will come into effect on 1 March.

 

Under the new initiative, companies will be given a colour-coded score on a spectrum from red to green, based on how much air pollution they emit and the steps they are taking to enhance environmental protection.

 

The system is expected to be used by banks when reviewing a company's suitability for a subsidy or new loan.

 

Businesses with a red score, denoting the most polluting firms, will be asked to improve their environmental impact before they will be able to secure a loan.

 

China saw record-high air pollution last month, with particulate matter in Shanghai hitting a level 14 times higher than the daily exposure levels recommended by the World Health Organization.

 

In response to the latest smog incident, China's biggest coal company's shares dropped in price, while stocks in environmental protection companies improved amid growing speculation that the government will continue to increase pressure on polluting industries.

 

The new credit rating system, which is also expected to help China achieve its target to reduce carbon emissions by 45 per cent from 2005 to 2020 per unit of economic output, is the latest in a raft of measures designed to tackle air pollution in urban centers.