China's biggest non-state oil enterprise urged the National Development and Reform Commission (NDRC) to impose a ban on using corn to produce ethanol fuel.

Zhao Youshan, chairman of the Oil Flow Commission of the China General Chamber of Commerce, told the Beijing Times that they have submitted a letter to the NDRC in an attempt to ban corn-based ethanol production, because it has pushed up corn prices at home and turned China into a corn-importing country in the first half of this year from previously a corn-exporting country.

China imported 78 million tons of corn in the first half because domestic corn prices were relatively higher.

In July, the average corn price in northeast China was about 1,845 yuan (US$272.5)?per ton, up 15.7 percent over the same period last year.

According to the study, China has the capacity to produce 10 million tons of ethanol fuel from 30 million tons of corn each year.

The amount of ethanol fuel produced from corn is small compared with the domestic demand for petroleum, said Zhao.

A study made by the Oil Flow Commission showed that in order to enjoy subsidies and gain a tax exemption, some ethanol factories chose to produce ethanol fuel from corn. That subsequently led to rising corn prices and a shortage of corn in the livestock sector.

In 2004, in order to promote the development of renewable energy and new energy, the NDRC and the Ministry of Finance jointly put forward a policy, under which testing programs were launched in Heilongjiang to produce ethanol fuel from corn. Factories could get a subsidy of 1,880 yuan and be exempted from all taxes by producing one ton of ethanol fuel.