The project, built by the Tianguan Ethanol Chemical Group Co., Ltd., is expected to cost 1.28 billion yuan (US$155 million) and take two years to complete. Combined with the company's existing facility, total fuel ethanol capacity would reach 500,000 tons a year.

Production and use of fuel ethanol is being vigorously promoted by the Chinese government, which hopes the product will help to promote the country's energy, agriculture and environmental protection industries.

Fuel ethanol is produced from grain, of which China has a surplus. It helps to alleviate China's shortage of oil resources and is a less polluting substitute to oil.

Company sources said the new ethanol project would consume more than one million tons of old grain annually. About 10 percent of stored grain in Henan, a major grain producer in China, is classed as old.

Fuel ethanol has already been put into trial use in China. From2001, Zhengzhou, Luoyang and Nanyang in Henan have been experimenting with using ethanol as vehicle fuel. Satisfactory results have been reported.

(Xinhua News Agency November 18, 2002)