Factories were one source, but in-home coal furnaces were a gigantic pollutant source in aggregate. I read articles about villagers banned from this who couldn't afford cleaner heat sources. Is that still the case?

Yes. This issue was exposed by netizens on social media and has been widely reported by numerous media. The local government has now lowered natural gas prices and increased subsidies. but i think the cost is still likely higher than burning coal. Hopefully they will continue to improve this situation.