China needs to slow investment in new biofuel projects using corn to ensure sufficient supplies of the grain are available for animal feed and to curb food inflation, a report from the State Information Center said.
Chinese companies “significantly'' increased corn consumption to produce ethanol after demand for the fuel soared, the center said in the report, carried on the Shanghai Securities News. Corn is used as feed for pigs and chickens.
“Rising inflation will hurt the low-income population and delay local governments' measures to reform energy prices,'' the report said. A nationwide investigation of corn-based ethanol projects is needed to avoid excessive construction, it said.
The cost of food, which makes up a third of China's key price index, is rising as farmland gives way to real estate projects while increasing affluence raises demand. The government sold grains from state reserves and subsidized farmers to boost supply and slow increases in food prices, which rose 7.1 percent in April after jumping 7.7 percent in March.
Demand for ethanol has grown more than 15 percent annually as China encourages use of alternative energy to ease reliance on crude oil and cut pollution. Ethanol is blended with gasoline and diesel to reduce pollution from vehicle engines.
