China will increase its financial support for mergers and acquisitions (M&As) in the steel and coal industries, an official statement has said.

The loan ratio for legitimate M&As could be raised to as high as 70 percent of the total value of a transaction, according to the statement jointly published by the China Banking Regulatory Commission, the National Development and Reform Commission and the Ministry of Industry and Information Technology.

Meanwhile, the government should strictly control credit delivery to prevent it from funding illegal new production capacity in the steel and coal industries.

Banks and banking institutions should not provide credit support to illegal steel and coal projects and should stop loaning to relevant companies, the statement said.

China is the world's largest producer and consumer of steel and coal. Cutting overcapacity is a high priority as the two industries have become a drag on growth.

In February, the government announced that steel capacity should be cut by between 100 and 150 million tonnes by 2020, 45 million tonnes of which should be achieved in 2016. Coal capacity reduction has been set for half a billion tonnes over the next few years, with 250 million tonnes expected for 2016.

Progress came faster than expected. In late November, the State Council announced that both targets for the year had been achieved ahead of schedule.