China's industry chiefs have warned more than 2000 companies to close obsolete production facilities within two months or face cuts in credit and a suspension of government approvals.

The official Xinhua news agency reported that The Ministry of Industry (MIIT) and Information Technology has set the deadline at the end of September for firms to shut down outdated facilities in a move to cut overcapacity and raise the level of economic growth.

The government order involves 2087 companies and covers 18 industries: iron, steel, coke, iron alloys, calcium carbide, electrolytic aluminium, copper smelting, lead smelting, zinc smelting, cement, paper-making, glass, ethanol, monosodium glutamate, citric acid, leather-making, printing and dying, and chemical fibres.

The iron, cement and sectors had the most numbers of companies ordered to close outdated energy-consuming and polluting capacities.

Liuzhou Iron and Steel Co, according to the government decree, would need to slash 2Mt of outdated iron-making capacity.

Companies that failed to do so before the deadline would have their waste discharge licenses revoked, said Li Yizhong, Minister of Industry and Information Technology.

Bank loans and new project approvals from the government would not be provided to those companies who failed to clean up, said Li.

The failing companies would not get approval from land management authorities to apply for more new land for their projects while production licenses would also be recalled by relative authorities, said Li.

Companies could face possible power cuts from suppliers if they failed the mission, said Li Yizhong.

"Outdated capacities consume energies heavily, pollute the environment, and are safety risks. They reflect the very crude and quantitative mode of economic growth," said Li.

"They are also the causes of the low quality, inefficiency, and weak competitiveness of our national economic development," he said.

The government has set a target to improve energy efficiency by 20% by the end of 2010, compared to the level five years ago.