The central bank yesterday detailed instructions for mainland lenders to cut loans to energy inefficient and polluting enterprises in a sign that the government will target the financial sector in its campaign to clear up environmental abuses. The statement, released by the People's Bank of China on its website, came a day after the State Environmental Protection Administration (Sepa) announced plans to unveil a green credit initiative. It is the first time the central government has resorted to a monetary tool to bolster environmental policy. Calling for stronger lending practices, the announcement instructs banks to 'strictly control all new loans to highly resource intensive and polluting enterprises and quicken moves away from providing credit for outdated industrial technology'. The announcement also says banks should guard against feeding overcapacity amid government efforts to restructure the economy. Beijing is in the process of shutting inefficient and technologically backward factories as it battles to create a more efficient industrial structure. 'This is rhetorically significant because it is the first instance of monetary policy paying heed to environmental and resource concerns,' said Arthur Kroeber, director of economic consultancy Dragonomics. The warning against lending to environmentally dubious enterprises places responsibility on both the polluter and paymaster for the first time and is recognition of the growing role played by financial services in shaping economic development. In another first, the central bank's statement also calls for greater co-operation with Sepa, traditionally regarded as a paper tiger among heavyweight government agencies. 'The fact that the central bank is working with Sepa is significant because it implies there is serious pressure from the top to get all agencies on board,' Mr Kroeber said. Sepa deputy director Pan Yue on Wednesday said he was working with a number of government departments towards introducing economic incentives to curb pollution, including 'green loans' that would be given only to enterprises passing mandatory environmental assessments. The government's decision to direct commercial bank lending by fiat is known as 'window guidance'.