A northern Chinese city has come up with an innovative way to encourage residents to keep the streets clean, by paying just under $0.01 for every used cigarette butt they pick up.

Authorities launched the campaign in Shaanxi province's Xianyang city in September.

So far enthusiastic residents have handed over 7m butts, the official China Daily said.

In return, the local government has paid out 100,000 yuan (€11,000) for 2m of the butts and still owes for the remaining 5m.

'We started the drive as part of an effort to make our city more clean and civilised, increase public environmental awareness and warn against the dangers of smoking,' said Hou Xi'an, deputy head of the office overseeing the campaign.

One person reportedly handed over 7,500 cigarette butts all at once.

However, some people are cheating by rooting around internet cafes, restaurants and even rubbish bins to collect butts and get a reward, according to some media reports.