Methanol is a simpler form of alcohol which is can be obtained from wood or, more commonly, from coal. The Chinese seem to be working on it because it's an alternative to the day-by-day, more expensive oil, not because it brings environmental benefits. Methanol is a very poor performing fuel. Let's take an ideal car that gets 10 l/100 km (23.5 mpg). The same vehicle on ethanol gets 12.5 l / 100 km (18 mpg) and 15 l / 100 km (15.5 mpg) on methanol.
Two Chinese carmakers, Changan (one of its models pictured above) and Chery, have already introduced methanol prototypes, which have similar modfications as other flex-fuel cars. China is proposing to introduce M85 (85 percent methanol, 15 percent of gasoline) at pump stations. Estimates are that there could be about 50,000 M85 / flex-fuel ready vehicles ready for next year.
Related (and smarter ways of producing and using methanol):