YINCHUAN -- Shenning Group, a subsidiary of China's biggest coal producer Shenhua Group, said Thursday that the world's largest coal-based olefin plant in northwest China had started operating.

The plant, which it controls, is designed to churn out 500,000 tons of polypropylene and 240,000 tons of other by-products, including 41,200 tons of liquefied fuel, per year, it said in a statement.

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The facility in a chemical production base in Yinchuan, capital of Ningxia Hui autonomous region, involves a total investment of 17.8 billion yuan ($2.74 billion).

It is the country's first major facility to use coal rather than oil to produce polypropylene.

China overtook the United States to become the world's largest polypropylene market in 2003. Last year, it consumed 10 million tons of olefin, including 3 million tons from imports.

It is hoped China will build similar facilities in the near future as the country is rich in coal but poor in oil.

"By having similar plants near coal bases, we can use coal more cleanly and efficiently," said Chen Zhiqing, a Shenning Group executive in charge of the petrochemical subsidiary.

"This is also a strategic alternative to tackle the energy crisis," Chen said.