For the first time in years, a cargo ship of U.S. corn found its way through a Chinese port earlier in 2010. Several years of drought, an ever growing population, and an expanding middle class all pointed toward the expectation that China would resume corn imports. That may have come to a halt, today.

Pay much attention to China at all and you’ll know that the surface of an issue sometimes doesn’t truly reflect what’s underneath. Illinois Corn value added projects director Phil Thornton said it was only a matter of time before China rejected a cargo of corn. “They evidently have enough, for now,” he said.

But the Red Dragon is hungry, without a doubt. How hungry is the Chinese government willing to let that dragon get before resuming U.S. corn imports? That’s the $64,000 question.

By Tracy Zheng, Niu Shuping and Tom Miles

BEIJING (Reuters) - China has rejected a cargo of U.S. corn after finding it contained an unsanctioned genetically modified strain, two sources familiar with the situation said on Friday.

"China only allows 11 varieties of GM corn to be imported to the country, and the cargo was found with GM material outside the 11 varieties," said one source, who declined to be identified.

"The animal and plant quarantine department has barred it from entering China," the source said. He said it was supplied by a Japanese trading house.

The cargo of 50,000-60,000 tonnes was shipped to a port in the China's southern province of Guangdong in September. The problem was detected only in October, the same source said.

China's first ever rejection of a U.S. corn cargo, if confirmed, risks deepening a trade spat with the United States and a bigger diplomatic row with Japan.

Chinese quarantine officials at Shenzhen in Guangdong, which accounted for half of the 513,000 tonnes of corn imported by China last month, declined to comment.

"If we have any information there will be an official announcement," said an official at the local quarantine bureau.

A third corn trading source said he had heard one Japanese cargo was "in trouble" in the south of China. But he could not confirm it had been rejected.

Chinese corn imports have rocketed this year, and are expected to continue growing next year, after China's own harvest couldn't keep up with a boom in demand, mainly driven by production of corn-based animal feed.

It was unclear if the rejection of a cargo on GMO grounds would have a wider impact on the corn trade.

China has long used its tough rules on GMOs to keep U.S. corn out of its market, the world's second biggest. But, struggling to keep up with demand, it gave its first safety approval to a GMO strain of corn late last year and began importing again this year, the vast majority of it from the United States.

Chinese relations with Japan have soured in recent months following the detention of a Chinese fishing boat captain by the Japanese coast guard after their boats collided near disputed islands in the East China Sea.

But the two countries' foreign ministers met on Friday in a "very good atmosphere," according to Japanese Foreign Minister Seiji Maehara.

U.S. Secretary of State Hillary Clinton will also visit China on Saturday, stopping over on Hainan Island during a two-week Asia-Pacific trip to meet Chinese State Councillor Dai Bingguo.

(Reporting by Tracy Zheng, Niu Shuping and Tom Miles; editing by Simon Webb and Keiron Henderson)