Mr Yaw Osafo-Maafo, Minister of Finance on Monday said collaborative efforts between the governments of Ghana and China were underway to establish a pulp and paper mill at Daboase in the Western Region.

He said as part of these efforts the Chinese government had successfully completed a feasibility study into the use of tropical hard wood for the manufacture of pulp and paper in Ghana.

Mr Osafo-Maafo made the announcement at a signing ceremony for a 3.5 million-dollar (25.6 billion cedis) Chinese grant to Ghana. Mr Lu Yongshou, Chinese Ambassador, who signed on behalf of his country, also presented the result of the feasibility studies to the Minister.

Mr Osafo-Maafo said unlike other grants from donors that come with predetermined purposes the government was yet to determine what the money would be used for.

He, however, hinted that some of the money would be given to the ministry of defence to undertake some of its numerous development programs.

Mr Osafo-Maafo said over the past 50 years Ghana had benefited from Chinese loans and grants for several projects including the National Theatre, Drama Studio, Afife and Nobewan Irrigation projects and the Dangbe East District Hospital.

"Recently the government sent a 10-member delegation to China to learn the Chinese experience in the industrial use of bamboo and its product," he said.

"This is part of efforts to import Chinese expertise in the use of bamboo for construction and other purposes in Ghana."

Mr Osafo-Maafo said there was a great potential for bamboo exports from Ghana to China, adding that the government intended to take advantage of that market.

He told the Chinese that the grant would be used judiciously and expressed the hope that Ghana-China co-operation that dated back to 1961, would grow from strength to strength under the Kufuor administration.

Mr Yongshou said the grant was an expression of China's goodwill and friendship with Ghana, adding that it was to support the development programmes that the Ghanaian government was undertaking to raise the living standards of the people.

He said talks between the Chinese and Ghanaian governments were underway for the cancellation of more than 77 billion cedis debt Ghana owed China.

Mr Kwame Addo Kufuor, Minister of Defence, who witnessed the ceremony, said the ministry has designed health, agricultural and socio-economic projects. "We have an agro-based project to convert the Accra plains into one of the food baskets of the country," he said. "We have so far received a total of 410 million cedis from local businessmen for this project."

He said the ministry had designed a facelift project for the 37 Military Hospital to make the hospital, the second largest in the country and a knowledge centre in the health sector.

Mr Addo Kufuor said the project would include a first class maternity department, accident centre and emergency centre among other facilities. He acknowledged Chinese support for the Ghanaian military and appealed for more support.