Chinese authorities have approved a mega-merger between the country's largest coal producer and a top electricity firm, the government said Monday, reportedly creating the world's biggest power company in terms of capacity.

The tie-up between the two state-owned companies -- coal producer Shenhua Group Corp. and China Guodian Corp. -- will be named the National Energy Investment Group Co. Ltd., the State-owned Assets Supervision and Administration Commission said in a statement.

The new firm will become the world's largest power company in terms of installed capacity, according to Bloomberg News, which said its total assets will exceed 1.8 trillion yuan ($271 billion).

Beijing has promised to cut its coal production capacity to curb pollution and shift the economy towards a consumer-driven one, while also trimming bloated industrial sectors.

It has halted construction of dozens of new coal-fired power plants across the country this year to address overcapacity.

The main business of Shenhua Group Corp. involves the production and sale of coal, railway and port transportation of coal-related materials and power generation and sales, according to its website.

China Guodian Corp. mainly develops, operates and manages power generation assets and organises electricity production and sales. Its total assets reached 803.1 billion yuan ($121 billion) as of 2016, the company said on its website.

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