Ethanol fires hope for China's poor Guangxi

NANNING, China (Reuters) - Something is afoot in China's top sugar-growing region of Guangxi.

Over the past year, small new farmhouses have sprouted, looking incongruous among the southern region's fields of sugar cane and karst mountains -- similar to those in Guilin, one of top tourist attractions in China.

High prices for the commodity in past few years had encouraged farmers to plant cane to the utmost. It has helped pad the pockets of farmers in an impoverished region left behind by the country's economic miracle.

Now, hope runs high in China for Guangxi's about 30 million farmers to jump on the biofuel fever. Beijing has begun encouraging ethanol made from non-grain crops, such as cassava -- known also as tapioca -- the region's other main crop.

"We are talking about sugar televisions, sugar washing machines and even sugar brides," said Pan Xunxin, an official in Chongzuo, Guangxi's top sugar cane city west of Nanning.

"Sugar is everything for this region. In the past, farmers could not think of anything beyond getting enough food ... It would be good for farmers to have another means to earn money."

But it faces a quandary: how to get enough biomatter to sustain a raft of ethanol capacity envisioned by top grains trader COFCO and top oil producer China National Petroleum Corp.

Biofuels -- energy squeezed from all kinds of living matter, such as sugar, corn or rapeseed oil that burn cleaner -- are fast gaining popularity around the world in an era of sky-high oil prices and serious threats of global warming.

Beijing has already pledged subsidies for designated biofuel plants. It currently grants about 1,300 yuan ($167) a ton -- in line with U.S. subsidies for the biofuel. There are four designated producers in the northeast, which mostly use corn.

"In the coming five years, China would develop ethanol only by using non-grain feedstock such as cassava or sweet sorghum," said an official advising Guangxi's local government.

"To use cassava is more realistic and mature at this stage as we have the technology and production," the adviser said.

Guangxi accounts for a whopping 70 percent of China's annual cassava output of about 9 million tonnes. It is already home to many producers of the cassava-ethanol used for manufacturing liquor, such as Guangxi Xintiande Energy Co. Ltd.