Beijing, Dec 11 (IANS): The Asian Infrastructure Investment Bank (AIIB) on Monday announced a $250 million loan to China to reduce its dependence on coal by 650,000 tonnes annually by connecting around 216,750 rural households to a natural gas distribution network.

The Beijing Air Quality Improvement and Coal Replacement Project is expected to be completed by 2021 and includes construction of a natural gas distribution, low-pressure gas pipeline and household connections as well as installing gas metres in houses in 510 villages to help them transition from coal to gas, according to the AIIB statement.

"This investment demonstrates our commitment to helping members transition to cleaner sources of energy and our focus on enhancing the economic and social viability of Asia," said AIIB Chief Investment Officer and Vice President D.J. Pandian.

Upon completion, the project would also reduce annual carbon dioxide emissions by 595,700 tonnes, particulate matter by 3,700 tonnes, sulphur dioxide by 1,488 tonnes and nitrogen oxide by 4,442 tonnes to improve air quality in Beijing and reduce risk of respiratory and heart diseases, reports Efe news.

It is the first ever loan to be granted by AIIB, a multilateral financial institution founded in 2016, led by China and which counts India, Russia, Germany and South Korea among its members.

"China's commitment to reducing its reliance on coal will change lives and improve the environment and that is why we are investing in a project aligned with their ambitious plan," AIIB President Jin Liqun said in a statement on Monday.

Liqun added that their commitment is a part of the Paris Agreement and will serve to "introduce sustainable infrastructure that will reduce greenhouse gas emissions and help vitalize one of the most important economic hubs in Asia".