Biofuels seen as a luxury China cannot afford

China cannot afford to embark on industrial production of grain-derived biofuels because supplies of corn and other crops are needed to feed the country's 1.3 billion people.

"It would be a disaster for us if we depend on a huge amount of corn and other grains for energy," said Zhai Huqu, president of the Chinese Academy of Agricultural Sciences, in comments quoted by the official China Daily.

China, which relies mostly on polluting energy sources like coal, has set a goal of producing about six million tons of cleaner-burning substitutes such as ethanol, which is derived from corn, by 2010 and 15 million tons by 2020.

But with prices of corn and other grains soaring as demand rises in China and arable land increasingly being swamped by development, top officials cast doubt on such goals.

Vice Finance Minister Zhu Zhigang said biofuels should only be produced once the supply of grain exceeded demand, the newspaper reported.

"The government will impose strict controls on any biofuel project using grain as the raw material," Zhu said.

Ethanol is the main biofuel produced in China, with output hitting 1.02 million tons last year. Corn accounted for 76 percent of the raw material, with wheat and sorghum providing the rest.

Prices of corn, soy and wheat have approached record highs in recent weeks as investors from China and globally seek to cash in on increasing demand in the world's most populous country for biofuel.

"We predict that agricultural products will be as hot as petroleum in the future," the China Daily quoted a dealer from the Dalian Commodity Exchange as saying last week.

The increases also are due to growing meat consumption in China, which requires the use of more grain as livestock feed, state media have said.

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