Luan Enjie, director and chief commander of the lunar satellite project at the China National Space Administration (CNSA), said Thursday development of the 1.4 billion yuan (170 million US dollar) project was underway, the Xinhua news agency reported.

China said late last year it hoped to land an unmanned spacecraft on the moon by 2010.

State media said earlier the country's first lunar exploration craft, Chang'e-1, would orbit the moon for at least 12 months.

It is named after an ancient legend about the fairy Chang'e who flies to the moon.

China had gained invaluable expertise and experience from the country's first manned space flight, when astronaut Yang Liwei orbited the Earth 14 times in October last year.

It made China only the third country in the world to send a man into space.

The country's desire to compete in space with other world powers has become a mammoth undertaking.

Since its space program was set up in 1992 it has grown to employ tens of thousands of scientific, manufacturing and planning personnel in more than 3,000 factories.

SPACE.WIRE