China plans tougher pollution limits and heavier penalties in a revision of its air pollution law, state-run news agency Xinhua said, as the government battles to reduce smog that takes hundreds of thousands of lives each year.

The Standing Committee of the National People's Congress is this week considering a draft that would impose fines of up to 1 million yuan ($160,000) or even shut down factories that exceed emission limits, Xinhua reported late Monday.

China's current law came into force in 1987, and despite a 2000 revision has not been updated to address the nation's recent rapid economic growth, which has left major urban centres choked by smog.

Last month, a study by green group Natural Resources Defense Council said that pollution from the coal industry alone killed 670,000 people in China in 2012.

"Air pollution problems in certain regions have become prominent and smoggy days are often seen, all of which demonstrate that the existing law cannot fit in the current situation," Environment Minister Zhou Shengxian said, according to Xinhua.

A first draft of the new law was released by the State Council, China's cabinet, in September.

The revised law will set stricter standards for China's 264 million vehicles as well as for the coal industry and heavy-polluting manufacturing.

It will also include an early-warning system and contingency procedures for when pollution spikes in particularly affected areas, such as in the Beijing-Hebei-Tianjin region, which in the third quarter of 2014 suffered from pollution 45 percent of the time, Xinhua said.

Some of the measures outlined in the draft have already been put into place, although environmental policies are difficult to implement in China, partly because local agencies often lack the authority to penalise powerful state-owned companies.

A new environmental protection law will enter into force on Jan. 1, giving more power to environmental authorities to enforce pollution laws.