BEIJING - China has approved its first strain of genetically modified rice for commercial production, two scientists involved in the approval process told Reuters on Friday, potentially easing the way for other major producers to adopt the controversial technology.

The approval of the locally-developed rice, as well as China's first GMO corn, shifts the global balance of power in food trade and could prompt other countries to follow suit, experts said.

It will also enable China, the world's top producer and consumer of rice, to grow more of its staple food amid shrinking land and water resources.

The Chinese Ministry of Agriculture's Biosafety Committee issued biosafety certificates to pest-resistant Bt rice, two committee members told Reuters on Friday, with large-scale production to start in 2-3 years.

"We expect that with the Chinese approval of Bt rice it will be much easier for other countries to do this," said Robert Zeigler, director general at the Philippines-based International Rice Research Institute, which is developing a number of GMO strains of rice.

But Greenpeace called the move a "dangerous genetic experiment" and said it had previously exposed illegal cases of genetically engineered (GE) rice in China.

"If the Ministry of Agriculture cannot even control the illegal cultivation of GE rice, how can they manage the risks of large scale cultivation?" Lorena Luo, Greenpeace's food and agriculture campaigner in China, asked in an emailed statement.

China, which wants to raise grain production 8 percent to 540 million tons a year by 2020, has splashed out on GMO research, with $3.5 billion going on rice, corn and wheat.

The phytase corn was also locally developed by China's Academy of Agricultural Science and Nadaq-listed Origin Agritech Ltd (SEED.O), which has seen its share price double since shareholders were notified of the approval on Saturday.

Phytase corn will help pigs digest more phosphorus, enhancing growth and reducing pollution from animal waste and fertilizer runoff.

The rice and corn strains are China's first GMO grains approved for commercial production, although it already permits GMO papaya, cotton and tomatoes.

The strains still need to undergo registration and production trials before commercial production can begin in restricted areas, which may take 2-3 years, the scientists said.

The scientists declined to be identified as the government has not officially published the information. Officials at the Agricultural Ministry's biosafety office declined to comment.

"According to our sources, our information is yes, there was a meeting of the Biosafety Committe on GE rice and corn and the meeting has granted certification," said Greenpeace's Luo.

China is the world's top producer of rice, growing 60 million tons in the 12 months to October, but it exports only around 50,000 tons a month as most is consumed domestically.

"China is trying to ensure food security for its people and it will show a direction to many countries, such as India, that this is one of the ways of increasing productivity and ensuring adequate food supplies," said one Singapore-based rice trader with an international trading company.

Exports of GMO rice would be likely to face tough scrutiny abroad. Most of China's rice exports go to South Korea and West Africa, although there are buyers globally, including the United States, South America and Europe. China exports much more rice in prepared food, such as rice pasta or baby food.

The European Union's executive body, the European Commission, said in July that China needed to tighten export controls on rice products because shipments might contain traces of the Bt-63 strain, which is not authorized in the European Union.

While China is not yet growing GMO rice commercially, there are numerous field trials going on around the country.

Bt rice, developed by Huazhong Agricultural University, would help reduce the use of pesticide by 80 percent while raising yields by as much as 8 percent, said Huang Jikun, the chief scientist with the Chinese Academy of Sciences.

"We believe more genetically-modified technology will be used in agriculture production in future to increase production and reduce inputs," said Huang.

The IRRI's Zeigler said India and Iran were also developing Bt rice and the Philippines could approve the IRRI-developed Vitamin A-enriched GM Golden Rice by late 2011 or early 2012.

The advent of commercial GMO production in China could affect global prices for rice, which rocketed in early 2008, sparking fears that the bedrock of Asian cuisine might be in short supply.

"This news signals that there will be no fear of food shortage as we can produce as much as we want and China itself will not have to import any more," said Kiattisak Kanlayasirivat of Thailand's Novel Agritrade Co Ltd.

"Prices of white rice would get back to $200-$300 per ton again and supply should rise significantly," he said.

Benchmark 100 percent B grade white rice in Thailand, the world's top exporter and supplier of almost all of China's imports, was quoted at $565 per ton this week.

But lower prices could also slow the spread of GMO rice.

"Suppose rice prices remain low in the next few years, countries will be reluctant to take in technology if they have some concerns about it," said Samarendu Mohanty, a senior economist at IRRI.

"If rice prices remain high, then countries will be more willing to consider Bt or any other technology to boost production," he said. "So the market has a role to play."