December 21, 2006

China halts expansion of ethanol industry

China has suspended further expansion of its ethanol industry as processing corn for fuel and other industrial uses is being blamed for soaring grain prices.

With grain prices rising almost 5 percent in November, the National Development and Reform Commission (NDRC) has ordered local governments to stop approving new projects for processing corn for industrial uses.

The order, from China's top economic planning body, urges local governments to encourage planting of non-grain crops as raw materials to produce bio-fuels.

China currently produces 10 million tonnes of ethanol which is mixed with 20 percent of the country's gasoline. The country processed more than 23 million tonnes of corn for industrial use last year, recording an increase of 84 percent from 2001, while corn output grew by 21.9 percent over the same period.

The rapid expansion of the corn would squeeze the production of wheat and rice, said an official with the NDRC. The country recently witnessed a surge in prices of major grain products, including rice.

Grain price rose by 4.7 percent in November, per National Bureau of Statistics figures.