China's Environment Ministry has struck down a proposal to build the country's biggest hydropower dam project as it failed an environmental impact assessment, stalling for the first time any official project.

Construction work for the proposed Xiaonanhai Dam as well as other dams should be banned on the Jinsha River, the upstream segment of the Yangtze River, the Ministry said in a stern order.

The Xiaonanhai Dam, with an initial investment plan of 32 billion yuan (USD 5.13 billion) and a projected electrical output of 2 million kilowatts, would be one of the biggest projects to be banned in the country.

China has already built six dams on Yangtze, including the world's biggest USD 26 billion Three Gorges dam.

The response document, which has not been made public, said the national-level reserves protecting rare fish located upstream of the Yangtze have been greatly affected over the past 10 years because of the dam projects on the Jinsha, state-run China Daily reported.

The projects were rejected to secure the boundaries of the reserves, it said.

Other projects banned were the Zhuyangxi Dam and Shi-pengshui Dam.

Environmental Protection Minister Chen Jining had earlier stressed that the revised Environmental Protection Law, which provides strict punishments for violators, should be brought into play.

No projects are allowed to start construction until they pass an environmental assessment.

Ma Jun, an expert at the Institute of Public and Environmental Affairs, said the rejection of the projects sent a signal that the Ministry was determined to fight actions that harm the nation's ecology.

"The document exhibited a serious attitude towards the projects. So I believe these dams will definitely not be constructed in the future, which is positive for the environmental protection field," Ma said.

"The key for environmental protection in China is the implementation of the law. I'm glad to see that the minister has been stressing this point and holding to it," he added.

The Xiaonanhai Dam was first proposed in the 1990s, when Chongqing was still part of Sichuan province. It was pushed forward after 1997, when the city became a municipality.

However, the project has been suspended since its foundation was laid in 2012 because of protests from environmentalists, who said it would hinder the spawning of dozens of rare fish species in the Yangtze River.

Objections also came from Luzhou and Yibin in neighbouring Sichuan province.

Both cities, located upstream of the Yangtze, worried that the project would curtail traffic on the Yangtze, which flows across the province.