China has resisted calls to curtail its production of greenhouse gases despite expectations it will overtake the United States as the world's largest source of the gases that scientists say are raising global temperatures.

China argues that, as a developing nation, it must be allowed to let its economy, expanding at a staggering pace, continue to grow free of restraint.

The new fund will receive a portion of the money paid to Chinese companies under a global system called the Clean Development Mechanism set up under the Kyoto protocal.

Under the mechanism, industrialised countries that are required to reduce emissions under Kyoto can offset them by funding companies to set up emission-reduction projects in developing countries, such as China, that have no binding reduction targets.

China has already green-lighted 885 such CDM projects, said Xie Zhenhua, a vice minister with the National Reform and Development Commission, the nation's top economic planning body.

The projects, if successful, would bring in 15 billion dollars, three billion of which would go into the new fund, he said.

The new fund will disburse grants and loans to fund conservation-related projects in China, officials said.

"The CDM is a win-win mechanism for the world community," Xie said during a launch ceremony in Beijing.

China has not signed up to the Kyoto protocol which requires developed countries to reduce emissions by an average of 5.2 percent between 2008 and 2012 compared with 1990 levels.

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