Consumer demand for gold in the Chinese mainland increased 12.8 per cent last year from 2003, according to the World Gold Council (WGC).
The mainland's consumer demand for gold reached 234 tonnes in 2004, up from 207.4 tonnes in the previous year, according to WGC statistics.
The growth jumped from 1.7 per cent in 2003.
Gold demand remained robust in the mainland, the world's fourth-biggest gold consumer after India, the United States and Turkey, the WGC said in a statement to China Daily.
"Gold demand in the mainland is expected to maintain such a growth momentum in 2005 as a result of China's steady economic growth and bullish gold prices," said Albert Cheng, managing director of the WGC's Far East operation.
World gold prices reached a 18-year record high of US$455 per ounce late last year mainly because of the weak US dollar.
Demand for gold jewellery in the mainland rose 11.5 per cent year-on-year to 224.1 tonnes last year, according to statistics.
"The K-gold (Italian-inspired 18-carat gold) campaign initiated by the WGC last year has been a successful attempt to tap into the young consumer market in China, and it also gave us a strong indication that stylish designs are the key buoyant gold jewellery sales," Cheng said.
"We expect this gold jewellery rush to continue flourishing in 2005," Cheng said.
Demand for 18-carat gold jewellery in the mainland rose 7 per cent during the fourth quarter of last year from the same period in 2003.
The mainland's demand for the more traditional 24-carat gold jewellery rose by more than 10 per cent year-on-year in the fourth quarter of last year.
"WGC will allocate more resources to support the gold jewellery industry in the region and will expand the reach of our campaign into more cities," Cheng said.
Rising gold prices have also made the investment element of any gold purchase more attractive, the WGC said.
Gold demand as retail investment in the mainland surged 53.1 per cent to 9.8 tonnes last year from 2003, according to statistics.
At the end of last year, the China Banking Regulatory Commission (CBRC) finally gave its long-awaited green light to the marketing of investment gold products by commercial banks.
The Bank of China, Agricultural Bank of China, and Industrial and Commercial Bank of China - the nation's three major State-owned commercial banks - have been approved by the CBRC to conduct gold retail investment businesses.
With several other banks finding ways to do the businesses prior to the CBRC's nod, gold retail investment demand in the mainland skyrocketed to 4 tonnes in the fourth quarter of 2004 from 1.7 tonnes in the third quarter.
"We hope gold demand as retail investment in the mainland will have a big breakthrough this year," Cheng said.
However, Cheng stressed that gold investment does not mean "speculating in money" and it must be made sure that the development of China's gold investment market is for the purpose of providing the Chinese people with "a safer means of keeping the value of assets."
"There will be great risks in speculating in the gold investment market because there are many uncertainties such as in the stock market," said Liu Shan'en, an analyst with the Beijing Gold Economics Research Centre.
"Gold investors in the Chinese mainland should be especially cautious as gold investment is a new thing for them," Liu told China Daily.
In the past, Chinese individuals were forbidden to own gold bullion under the central government's tight control of the gold market.
The mainland's strong gold demand and high gold prices significantly boosted Chinese gold producers' output and profits last year.
Gold output in the mainland reached a record high of 212.35 tonnes in 2004, an increase of 11.75 per cent from 2003, according to statistics from the China Gold Association.
China now also ranks fourth in gold output in the world.
The profits of gold producers in the mainland surged 38.06 per cent year-on-year to 2.65 billion yuan (US$320.16 million) from January to November last year.
Gold prices at the Shanghai Gold Exchange, the only one of its kind in the mainland, fluctuated between 100.55 yuan (US$12.14) and 121.55 yuan (US$14.68) per gram last year in line with fluctuations in the international gold market.
The gold trade volume at the exchange stood at 665.3 tonnes in 2004, up 41.35 per cent from the previous year.
The gold exchange was launched in 2002 and now has 108 trading members, including commercial banks, gold producers and processors in the mainland.
Chinese gold producers previously had to sell all of the gold to the People's Bank of China, the nation's central bank.
The WGC's statistics showed that gold jewellery demand in the Hong Kong Special Administrative Region grew 15 per cent to 13.8 tonnes last year from a year ago.
This was the first year-on-year growth in gold jewellery demand in Hong Kong since 1997.
This growth resulted from a lively wedding season in Hong Kong and heavy demand from tourists, particularly those from the mainland, according to the WGC.
Gold demand as retail investment in Hong Kong stood at 1.2 tonnes last year.
In Taiwan Province, demand for gold jewellery also increased 15 per cent to 20.7 tonnes last year from 2003.
This was the first year-on-year growth in gold jewellery demand in Taiwan since the early 1990s.
Retail investment demand for gold in the province reached 1.2 tonnes last year.
(China Daily March 3, 2005)
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