New coins using copper alloy in denominations of 5.0 yuan and 10 yuan would replace some of the paper currency now in circulation, they said.

The Luoyang Engineering Research Institute for Non-Ferrous Metals Processing has completed material testing for the new coins, said Li Yaomin, director of research.

"The new coins will make it easier to use pay phones and vending machines," he said. The number of new coins to be minted was being kept confidential by the central bank, Li said.

Industry officials said that Luoyang Copper Works, the largest copper processing plant in China, had tried to capitalise on a recent trophy deal to make itself a front-runner for China's coin minting programme.

Luoyang Copper has exported 1,500 tonnes of copper alloy for casting new euro coins, which are due to be introduced fromnext year.

But the publicity campaign has raised some eyebrows and Luoyang Copper officials were now playing down the deal. "Making alloy for coins does not require complicated technology," an copper analyst said.

"But the supplier's discretion is the key," he said. "What goes into the alloy has to be kept strictly confidential." The analyst scoffed at a newspaper report that Luoyang had signed a long-term supply contract to provide more than 10,000 tonnes of material a year.

He said the European coin works were buying material only as needed. "When there are enough new coins in circulation, demand will fall off," he said.

Two Luoyang officials contacted by Reuters were tight-lipped about the supply contract. "We prefer not to comment on this sale," said one from the company's trading department, noting that the deal had been "embellished" in some recent media reports.

A third official, from the company's public information department, said Luoyang initially sold 500 tonnes of copper alloy and thenanother 1,000 tonnes to Europe through a dealer.

He said there was an "understanding" that Luoyang would continue supplying the alloy for up to three years, but he declined to confirm a long-term supply contract.

The official admitted that Luoyang was "working hard" to win the domestic coinage contract.

Industry sources said that besides Luoyang, other top contenders were the Shenyang Non-ferrous Metal Works and the Shanghai Non-ferrous Metal Works.

"It depends a lot on lobbying efforts by the local governments," one analyst said.