China may buy 200,000 tonnes zinc on Wednesday * Steel mills, carmakers to be offered incentives, tax breaks * China doubles soybeans purchases, ups rice buying * Crude oil imports up 12 pct Dec as state, firms stock up By Shen Yan and Polly Yam BEIJING/HONG KONG, Jan 12 (Reuters) - China's commodities buying spree will turn to zinc this week as the state stocks up on cheap raw materials, a drive which seems motivated by cheap prices rather than a desire to throw a lifeline to producers. In a measure of Beijing's lack of sympathy to calls for bailouts of struggling industries, China's carmakers and steelmakers are likely to see no government cash, merely tax breaks and incentives, an official source told Reuters on Monday. Only in agriculture, where farmers are trying to offload a bumper harvest, is the government deliberately driving up prices and soaking up excess supply, doubling its existing soybean purchase and expanding its rice buying. China's State Reserves Bureau (SRB), which has already bought aluminium and indium, is scheduled to meet representatives of five or six large smelters on Wednesday for a zinc bidding round, industry sources said on Monday. [ID:nHKG115885] As in its aluminium purchase, where it paid almost 10 percent over the spot market, the SRB is expected to pay a premium for its zinc. One source said it could buy 200,000 tonnes. That is less than the expected 300,000 tonnes but still enough to tighten supply and drive up spot prices, given the small surplus in the zinc market, said Jing Chuan, chief researcher for Great Wall Futures in Shanghai. But a 200,000 tonne purchase would only be half the amount suggested by the China Nonferrous Metals Association, which has also proposed the state buy 400,000 tonnes of copper and 20,000 tonnes of nickel, state media reported last week. Copper purchases may not materialise any time soon. "We previously had a plan to build up copper reserves but it now seems we've had to suspend it," another official source said. "It's because of the price." The source did not elaborate, but Shanghai's most active copper futures contract, for April delivery , appears to have bottomed out over the last month and rose 1,180 yuan to 28,190 yuan ($4,123) on Monday. FOOD ON THE MENU, STEEL SHUNNED The government, which is sitting on the world's biggest foreign exchange reserves -- $1.9 billion at last count, has resisted calls to bail out companies crippled by the slump in demand and has pledged not to use a 4 trillion yuan stimulus package to invest in polluting or energy-intensive industries. One of the hardest-hit sectors, steel, has failed to convince Beijing's moneymen that the state should buy up its products, a plan that was floated by Industry Minister Li Yizhong last month. Along with automakers, steel firms are likely to be pushed towards consolidating and eliminating outdated factories, the official source said. "The National Development and Reform Commission together with other departments came to a basic agreement about details for the auto and steel plans last week, and these will be discussed at a State Council meeting this Wednesday," the source said. "If approved, they will be announced and implemented very soon." Proposals for the auto industry include reducing or even abolishing taxes on car purchases from the current 10 percent level and incentives for the development of cleaner cars, according to earlier state media reports. While Beijing keeps the purse-strings tight for metals, it is splurging on food, buying up 6 million tonnes of soybeans, or about 40 percent of the harvest, as well as corn, sugar and rice. Its total announced grains purchases account for about 11 percent of last year's record harvest. [ID:nPEK81341] The government, along with China's top oil companies, are also stocking up on crude oil, whose price has plunged in the past six months. Crude imports were almost 12 percent higher in December than in the same month of 2007. [ID:nPEK111160] For a FACTBOX of China's state purchases of commodities, please click on [ID:nPEK7636] (Additional reporting by Eadie Chen in Singapore and Jim Bai and Niu Shuping in Beijing; Writing by Tom Miles; Editing by Sue Thomas) ($1=6.838 Yuan)

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