(Agencies)
Updated: 2008-02-25 15:26

China will impose new restrictions on heavy polluters trying to list on domestic stock markets, according to a document released by the country's environmental watchdog today.

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The State Environmental Protection Administration (SEPA) said that the rules will help restrain the "over-expansion" of high-polluting and high energy-consuming enterprises and will also reduce capital risk.

SEPA launched a pilot scheme last year, and said that the IPO plans of 10 companies - including China Coal Energy - were delayed after failing to meet environmental standards.

According to the new rules, companies from sectors designated as high-polluting and high-energy consuming, which include thermal power, steel, cement and electrolytic aluminum, will have to submit to an environmental inspection if they wish to launch an IPO or apply for additional financing.

Their IPO application to the China Securities Regulatory Commission (CSRC) will also have to include recommendations drawn up by the environmental regulator before they are even considered.

SEPA and the CSRC will also set up a public information system to monitor the environmental activities of companies already trading on the stock market, as well as set up an "environmental performance" index that will enable shareholders to monitor the behavior of listed companies.

Pan Yue, deputy chief of SEPA, said that the measures were the third attempt to use economic measures in the battle against pollution, following last year's introduction of "green credit" and "green insurance" schemes.

He also said that the scheme would not only improve the environmental performance of listed companies, but would also help protect the interests of investors.

During a campaign against heavy polluters last year, the stock price of a number of firms - including the electricity producers, Datang, Huaneng, Huadian and Guodian - suffered, Pan noted.

Immature market entry mechanisms had allowed big polluters to list and raise funds and thereby increase their rates of pollution, but with state regulations on pollution and efficiency becoming more stringent, investors are now facing bigger risks, he said.

Pan said last year that China would introduce more economic mechanisms to help fight against pollution and inefficiency, noting that previous one-off campaigns, known as "environmental protection storms", had failed to get to the root of the problem.