SHANGHAI • China will use the stricter enforcement of environmental, safety and energy efficiency standards as well as tougher credit controls to help fight against overcapacity in key industrial sectors, the government said.

The world's second-largest economy has identified overcapacity as one of its key challenges and it has already pledged mass closures in the steel and coal sectors, but it has so far fallen behind on its targets.

The Ministry of Industry and Information said on Friday in a draft policy document published on its website that it would "normalise the stricter implementation and enforcement of mandatory standards" to tackle overcapacity in sectors such as steel, coal, cement, glassmaking and aluminium.

It would implement a "differential credit" policy that would allow lenders to extend loans to help firms restructure while cutting off funding for poorly performing enterprises targeted for closure.

Firms that fail to comply with new energy efficiency targets would be given six months to rectify their practices and would be closed if they fail to make progress. Those that continue to exceed air and water pollution standards would be fined on a daily basis and in serious cases ordered to shut.

The ministry said the authorities would cut off power and water supplies, and even destroy the equipment of firms that fail to meet environmental and safety standards.

It also repeated a previous pledge to implement differential and punitive power pricing policies to force firms to toe the line.

Beijing is concerned that some local governments have not been acting with enough urgency when it comes to dealing with overcapacity problems. On Thursday, the National Development and Reform Commission singled out regions such as Inner Mongolia, Fujian and Guangxi for failing to make progress.

REUTERS