Global climate change mitigation policies call for increasing use of biomass fuels as renewable substitutes to fossil energy resources. Quantified targets for biofuels introduction in to the market exist in the United States, the European Union, and a number of developing countries. In this context, mixing biologically produced ethanol with conventional gasoline represents an attractive technical option allowing for reducing emissions of greenhouse gases and lessening the dependence on non-renewable petrol in the transportation sector. This paper investigates technological and socio-economic aspects of ethanol production in developing countries, particularly in China, with special focus on determining eligibility of bioethanol projects for Clean Development Mechanism. Basing on the findings of the ASIATIC study (Agriculture and Small to Medium Scale Industries in Peri-urban Areas through Ethanol Production for Transport In China), we analyse how alcohol fuels can be produced in a sustainable way with mutual benefits between rural and urban people. The bioethanol production cost and life cycle CO2eq emissions were calculated for six different types of feedstock: sugarcane, sugarcane molasses, sweet sorghum juice, cassava, corn, and sorghum bagasse. Implications of the CDM rules and procedures for bioethanol industry were examined under the angles of environmental and economical additionality, and conformity with the principles of sustainable development. It is found that the starch-based (cassava) ethanol production path has the greatest potential for market penetration in China, followed by the conversion route using sugar-based feedstock (sorghum juice, sugarcane molasses). Meanwhile, the lignocelluloses biomass - to - ethanol technology may represent the highest interest for implementation as Clean Development Mechanism project.