BEIJING, July 6 (Reuters) - In the latest government initiative to improve China's grim environmental record, the central bank on Friday instructed banks to stop lending to projects that cause heavy pollution and waste energy.

The People's Bank of China urged banks to realise the "importance and urgency" of using financial services to promote green development.

In a statement on its Web site www.pbc.gov.cn, it instructed banks to call in existing loans, and to extend no new credit, to projects deemed undesirable by the government; it also told banks to lend less to sectors where there is overcapacity.

Energy conservation and environmental protection are rising fast up the political agenda in China, where about 460,000 people die prematurely each year from breathing dirty air and drinking polluted water, according to World Bank estimates.

The head of State Environmental Protection Administration (SEPA), Pan Yue, warned this week that China's traditional industrial growth model had pushed the environment to "nearly intolerable limits".

The central bank said it would work with SEPA to launch further environmentally friendly policies.

AlertNet news is provided by