China offers financial help for non-food biofuel cultivations

The Chinese government, seeking to tackle mounting food inflation, is offering financial support to biofuel producers and farmers who use non-food crops such as cellulose, sorghum or cassava as feedstocks.

The Ministry of Finance will provide subsidies and facilitate financing for farmers to reduce the risk of growing non-food crops or investing in forest products, according to state media reports that cited comments by Zeng Xiaoan, deputy director of the ministry’s department of economic construction.

Farmers will get a 3,000-yuan ($414) subsidy for each hectare of forest products for biofuel and 2,700 yuan ($370) for every hectare of non-food crops, Zeng said. The ministry will also subsidise demonstration projects making ethanol from cellulose, sweet sorghum and cassava or biodiesel from forest products to make it easier for them to get bank loans, he said.

In addition, projects that are up to industrial standards will be rewarded with 20% to 40% of their total investment cost, according to the ministry official.

The Chinese government has resorted to imposing a ban on price increases to combat record inflation levels, which it claims are threatening social stability. New regulations introduced by the National Development and Reform Commission (NDRC) forces producers of key commodities such as grain, eggs and edible oil to get approval for any price increases. Wholesale suppliers and retailers are required to get permission to raise prices above certain levels.

According to the NDRC, nationwide pork and beef prices had risen 43% and 46% respectively in January from a year earlier while for edible oil prices were up 53%.

The concern about bioenergy’s impact on food security and prices prompted China to ban the further use of grain for ethanol production last year. China is the world’s third-largest producer of fuel ethanol after the US and Brazil. It made an estimated 1.45 million tonnes of the biofuel in 2007, up from a recorded output of 1.3 million tonnes in 2006. More than 80% of Chinese ethanol is made from corn; other feedstock used includes cassava rice, sugar and paper pulp waste. Ethanol from sorghum is being produced on a trial basis.

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