As part of plans to reduce energy consumption, Beijing has ordered that 2,000 steel and cement mills with poor efficiency be closed down within two months.
Clouds of smoke billow from a metal factory
The Chinese Ministry of Industry and Information Technology has given 2,087 steel, coke, aluminium, glass and paper factories until late September to shut down.
Companies that refuse to comply with the order face having their bank loans frozen, their electricity cut and their licenses confiscated, Minister Li Yizhong has threatened.
China has become the world's biggest emitter of greenhouse gases
The aim is to improve energy efficiency and reduce overcapacity across several industries – especially steel, cement and paper.
China has become the world's third-largest economy in the past 30 years but it has some of the worst water and air pollution.
Beijing's goal is ambitious – the government is aiming for a 20 percent reduction in energy consumption per unit of economic output by the end of the year.
Energy consumption has already been curbed by 15 percent since 2005 when Beijing published its five-year plan to improve efficiency. However, the plans have suffered a setback this year as China's economic rebound and a construction boom have boosted demand for steel, cement and other energy-intensive products.
Water pollution in China has been detrimental for the fishing industry
Last week, official figures showed average energy consumption had risen by 0.09 percent in the months until June compared to the same period the previous year.
"The goals of the energy reduction plan have not been met. This new policy might be a new attempt to meet the energy-saving goals because the five-year plan is running out soon," explained Pan Yingli, an economist at the Shanghai Jiao Tong University.
"It would seem that we're back on the classical path of developing the economy. The processing industries have overcapacity and should have been dismantled. The service industry should have been developed instead," she added.
"But because it was worried about recession the government approved all sorts of industrial projects, which should have been rejected – especially in the western and central parts of China."
Thousands of workers could lose their jobs if the factories are shut down
Provinces sometimes ignore orders from Beijing
However, it remains to be seen whether the closures will actually take place as Beijing expects. It would not be the first time that decisions made by the central government are transformed beyond recognition by the time they get to the provinces.
"The local authorities of course don't want to annoy the central government," said Pan Yingli. "But at the same time they want to avoid harming their own economic interests. That's why they follow national policy only superficially. This is why the policies of the central government are often ineffective."
It would not be that surprising if, like in the past, the factories continued running under another name. The local authorities depend on taxes from local firms and they fear the wrath of workers who would lose their jobs because of the closures.
Author: Matthias von Hein/act
Editor: Disha Uppal