March 26, 2014 / 4:06 AM / 4 years ago

China's smog-hit Hebei cuts loans to polluters -report

BEIJING, March 26 (Reuters) - Banks in China’s smog-hit Hebei province last year turned down loan applications worth 12.3 billion yuan ($2.0 billion) in order to comply with new “green credit” policies designed to cut funding to polluting industries.

Banks in Hebei have been under instruction to deny credit to projects that will add capacity in restricted industries like steel, cement and glassmaking, according to a report in China Environmental News, a publication of the country’s Ministry of Environmental Protection.

Banking sources told Reuters earlier in March that banks have cut lending to bloated, polluting industries like steel and cement by as much as 20 percent.

Citing figures from Hebei’s banking regulators, the report also said banks in the province lent a total of 18.26 billion yuan to energy saving projects over 2013, and another 42.64 billion yuan on technological upgrades.

Banking regulators have issued blacklists to lenders in the province to make sure firms that violate environmental rules are not granted credit, it said.

Tighter lending rules have added to the credit crunch affecting Hebei’s steel mills, many of which have been struggling to find the cash to buy raw materials and pay wages. At least 16 steel firms in Hebei have now stopped producing, governor Zhang Qingwei said earlier this month.

“The performances of these enterprises have been poor and because their ability to survive is in question, and because of severe pollution, the government doesn’t let the banks lend to them,” Zhang Wuzong, president of private steelmaker Shandong Shiheng Special Steel told Reuters earlier this month.

“These two factors mean that they will inevitably close.”

$1 = 6.2024 Chinese Yuan Reporting by David Stanway; Editing by Richard Pullin

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