Wang said, "Rapeseed has unique advantages as a raw material for bio-diesel." He noted that rapeseed's chemical composition is similar to that of diesel; more importantly, rape can be planted in the winter off-season for farming, which solves the dilemma between developing bio-fuel and grain security.

Developing the industry

Jatropha curcas, also known as the physic nut, which grows in vast areas in south China, is also regarded as an excellent potential source for bio-diesel. It can be planted on barren land unsuitable for grain cultivation. And the trees don't require watering, fertilizer or pesticide.

In a development plan of the State Forestry Administration, the southwestern provinces of Sichuan, Yunnan and Guizhou have been listed as the key areas for cultivating jatropha curcas. In less than one month in 2006, three energy companies from China, Britain and the United States respectively launched programs to plant physic nut trees in Sichuan Province and to build several bio-diesel plants with an annual production capacity above 100,000 tons. The total investment in these programs is more than 20 billion yuan.

So far, there still are obstacles to using the fruit of jatropha trees to produce bio-diesel. A major one is the scattered planting of the crop, which raises the problem of high cost. "Although the industrialization of planting jatropha curcas requires a lot of investment, only large-scale plantation and marketing can push down the cost for bio-diesel material and ease planters' worries over a shortage of buyers as well as bio-diesel companies' worries over a shortage of suppliers," said Wu Guojiang, a research fellow on jatropha curcas in the South China Botanical Garden under the Chinese Academy of Sciences.

"Forests will supply over 30 percent of the bio-fuel raw material the country needs by 2010 and if forestry residue is included, the proportion is expected to reach 50 percent," Zhu Lieke, Deputy Director of the State Forestry Administration, said at a recent bio-fuel forum. He said the industry will seek to be a greater force in the national strategy of developing bio-fuel.

Of China's 54 million hectares of unused land that could be forested, around 15 percent could be used for cultivation as bio-fuel forests. Moreover, China has nearly 100 million hectares of reclaimable land, most of which could be developed into bio-fuel forests. Nonetheless, China still lacks a tree-planting plan. An expert from the Chinese Academy of Forestry who requested anonymity said the lack of water on unused land could cause a bottleneck.

"The time is ripe for China to develop its bio-fuel industry," said Zhu Zhigang, Vice Minister of Finance. At a national economic conference in June 2006, he said China would fully support research, development and use of renewable resources, including bio-fuel, solar power and wind power.

China's landmark Renewable Energy Law took effect on January 1, 2006, which could pave the way for rapid development of bio-fuel. For the time being, related government agencies are working on drafting the guidelines for implementing the law. According to Wang Mengjie of the Chinese Renewable Energy Society, the guidelines will include the following aspects. First, non-crop plants will be the raw material and priority will be given to cultivating bio-fuel plants on deserted land on mountains and saline or alkaline land. Second, the government will provide financial and tax incentives for the bio-fuel ethanol industry. "The Central Government will have a higher market entry threshold to reward companies with higher efficiency. The government won't withdraw from the market until the industry matures," said Wang.

At the end of 2006, the Ministry of Finance, the National Development and Reform Commission, the Ministry of Agriculture, the State Administration of Taxation and the State Forestry Administration jointly issued guidelines on granting preferential treatment to the bio-fuel and biochemical industries.

First, the government will establish a risk management scheme to subsidize companies for their losses when petroleum prices stay low for a long time. Second, the government will give preferential treatment or subsidies to raw material suppliers using idle land, saline or alkaline land and deserted land. Third, the government will encourage model projects using high and new technologies. Fourth, the government will give preferential tax treatment to bio-fuel and biochemical companies that face operating difficulties.