China's chemistry-loving leaders built a biofuel industry 25 years ago to dispose of surplus grain generated by policy mistakes. Chief Chemical Engineer Xi Jinping is now in charge, but he's obsessed with food security and EVs. China's biofuel industry is under threat from another chemistry breakthrough based on China's favorite raw material: coal.
An article on a Chinese chemical industry site last year saw little hope for China's biofuel industry, describing it as plagued by oversupply, in a constant state of structural adjustment, and facing a continuous barrage of threats, including soaring raw material costs and a shrinking petroleum market. The latest threat is the emergence of a cheaper coal-based ethanol undermining China's plant-based fuel ethanol industry.
China first launched a plan to produce fuel ethanol in 2001, and within a few years several facilities had been constructed in grain-producing provinces to distill a massive stockpile of old corn and wheat rotting in warehouses and temporary storage bins woven from straw. The stockpile had been bought up during a late 1990s grain glut by the grain bureaucracy at "protective prices" to head off uprisings by a rural population frustrated with low income, land seizures and excessive taxes and fees.
Within a few years the grain stockpile had been used up, and officials began to panic about grain shortages and rising global prices. In 2006 they issued a circular calling for strict controls on corn ethanol projects.
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| COFCO Biochem (Anhui) Ltd. Source: company web site. |
China experimented with non-grain feedstocks for ethanol such as sweet sorghum and sweet potatoes and jatropha-based biodiesel, but these were abandoned or remain inconsequential. Several cellulosic ethanol demonstration projects have never overcome technical challenges.
One non-grain ethanol project using cassava (aka tapioca) was rolled out in Guangxi Province. In 2008 China's Ministry of Agriculture trumpeted the cassava-based fuel ethanol pilot program as a panacea that would bolster "clean" energy supplies and ease air pollution problems without creating a "fuel vs. food" conflict. The cassava ethanol project was portrayed as a clever combination of a State-owned company, government support, R&D, and collaboration with poor farmers, but it was doomed. In 2011, the Ministry of Agriculture's Planning Institute raised concerns about reliance on cassava imports, cassava price fluctuations, and competition for raw materials from starch and food alcohol manufacturers. Nearly 70% of China's cassava supply was imported when the project was started and imports doubled to near 10 million metric tons by 2015. The cassava ethanol project disappeared from discussion. A January 2026 industry analysis reported that cassava-based ethanol production had been in decline since 2020 and predicted a further 50% drop in cassava-based ethanol production capacity due to its lack of competitiveness. (Cassava imports continued though--purchased from Thailand and Vietnam by starch and food alcohol manufacturers along China's east coast.)
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| Cassava field in Guangxi Province. |
Despite the "food versus fuel" conflict, authorities doubled down on plans to expand use of fuel ethanol by setting ambitious targets in 5-year plans released in 2010 and 2016. A 2017 plan for promoting use of ethanol in gasoline aimed to achieve nationwide use of fuel ethanol in gasoline by 2020, and the plan endorsed "moderate development of corn-based ethanol."
Another policy mistake--price support programs that kept Chinese grain prices elevated above international prices--resulted in another unintended stockpile of grain during 2012-16. While the price support for corn was in effect, China even imported DDGS and fuel ethanol from the U.S. But imports were cut off in 2017 after Chinese authorities eliminated the corn price support and dumped the corn stockpile into the domestic market during 2017-19. This briefly revived corn ethanol, and in 2017 a new corn-based ethanol plant was built in Liaoning Province. However, authorities stalled approval of other projects.
By 2020, authorities were clamping down again when the communist party's "Document No. 1" called for strict controls on use of corn for ethanol production, and the national E10 mandate was suspended. China Agriculture University scholars explained: the 2017 "moderate development" had been motivated by the need to use up excess corn stockpiles, while the reversion to "strict control" was prompted by the surge in corn imports during 2020-21.
China also had a stockpile of rice reserves that were largely inedible because they were moldy or contaminated with heavy metals. In 2019, a new ethanol project was quietly set up in Jiangxi Province to utilize a bulging stockpile of rice. COFCO-affiliated scientists published a series of studies promoting rice-based ethanol production, and one study revealed that COFCO's Guangxi ethanol facility -- set up to use cassava -- was using rice to make ethanol.
During the pandemic years 2020-22 travel fell off, and many alcohol manufacturers tried to shift to production of medical alcohol for disinfectants. Demand for medical alcohol dropped off again in 2023 after pandemic lockdowns ended, along with constant testing, vaccinations and disinfections. Fuel ethanol demand was eroded by a decline in travel and the rapid shift from gasoline-powered to electric vehicles.
The development of a coal-based fuel ethanol technology by the Dalian Institute of Chemical Physics of the Chinese Academy of Sciences is the new magic bullet for attaining fuel ethanol targets. A 2021 article praised the technology for "enabling fuel ethanol to break free from raw material constraints." The article dismissed plant-based ethanol, citing the depletion of aged grain stocks and high corn prices as barriers to using plant-based materials to meet fuel ethanol targets. State media reported that grain-based fuel ethanol production is 2.7 mmt, leaving a 10-mmt deficit to attain the nationwide E10 goal.
A 2023 ethanol industry study listed 23 ethanol facilities in China that could produce either food/industrial or fuel ethanol with combined production capacity of 8.1 mmt. Most of the capacity was corn-based, and the largest concentration was in grain-producing provinces of Heilongjiang (3.84 mmt), Jilin (2.05 mmt), Henan (1.6 mmt), and Anhui (1 mmt). Only 1 mmt of ethanol capacity was coal-based, but rapid expansion of new facilities was emphasized.
Last year's chemical industry article reported that coal-based ethanol capacity had reached 3 mmt and production had grown 146% in 2024. One industry executive claimed that coal-based ethanol capacity will exceed 10 mmt when planned projects are complete. While grain-based ethanol still comprised 70% of production in 2024, it was reported that capacity utilization was only 42% and all facilities in the Northeast were losing money.
Is this the end of China's meandering ethanol journey? A commentary last year in Economic Daily was a veiled policy signal, insisting that the grain reserve system is now so efficient that modern warehouses no longer contain old degraded grains that could be used for fuel ethanol. Rising corn prices in China this year are surely reinforcing the decision to abandon bioethanol in favor of coal-based ethanol. Chinese customs officials have signaled a displeasure with use of imported cassava by extending the inspection time for cassava at ports of entry by 20 days, raising costs and accelerating the decline of cassava-based ethanol.
No one seems to know much about the new Chinese coal-based ethanol technology. Coal-based ethanol is not biological and not renewable. It's unclear whether replacing gasoline with another petrochemical-based fuel has a net benefit to the environment. The coal-based ethanol is apparently manufactured using coal from domestic sources, but China imported 490 mmt of coal in 2025.
One lesson from this history is that the grand "win-win" schemes presented by Chinese engineers are rarely as amazing as they appear. Most initiatives have multiple objectives that often conflict, and big investments can be made based on fleeting circumstances. Many schemes are quietly forgotten and erased from history. In Chinese communism there are never any mistakes.
Could ethanol be part of a new trade detente with the U.S. next month? Could China offer renewed Chinese pledges to import ethanol, corn, or DDGS (the co-product of corn ethanol)? No sign of that so far but can't be ruled out, given China's history of biofuel policy reversals as leaders weigh competing priorities behind the scenes. Given the advent of EVs and declining gasoline use, adding to the fuel ethanol supply is not much of a priority for China. Are officials ready to scrap the corn ethanol industry? Seems unlikely since they are run by State-owned COFCO and SDIC, but COFCO will surely be handed other treats in a U.S.-China ag purchase deal (as they were in Phase One), including dibs on importing 25 mmt of soybeans and possibly corn imports. Chinese leaders seem less likely to allow ethanol imports to compete with its new coal-based ethanol plants operated by equally powerful energy companies. Could antidumping duties on U.S. DDGS finally disappear after almost a decade of protecting Chinese ethanol manufacturers?
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