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A gold jewelry store in Nanjing, Jiangsu province. The World Gold Council said in a report released on Wednesday that demand for gold jewelry on the Chinese mainland jumped by 21 percent year-on-year in the first quarter of 2011 to a quarterly record of 142.9 tons, valued at $10.4 billion. [Photo/China Daily]
In the report released on Wednesday, the WGC said demand for gold jewelry jumped on the Chinese mainland by 21 percent year-on-year to a quarterly record of 142.9 tons, valued at $10.4 billion and accounting for 25.8 percent of total gold jewelry demand in the first quarter of 2011.
He added that China's continued economic growth and public holidays will fuel gold jewelry demand in the second and third quarters of this year.
Cheng said that China has been the largest physical bar and coin investment market, whose growth in gold investment demand totaled 90.9 tons during the quarter. The annual gold demand was 187.4 tons in 2010, an increase of 71.1 percent over the previous year.
According to the report, gold demand in the first quarter of 2011 totaled 981.3 tons, worth $43.7 billion.
"China's gold demand grew largely because its central government has a positive view on gold," Cheng said.
Cheng said that despite being the sixth-largest official holder of gold, the People's Bank of China (PBOC) has much lower gold reserves in terms of the percentage of its total reserves at only 1.6 percent.
China has more than $3 trillion in foreign exchange reserves, Cheng said, and the government has expressed concerns about a weakening dollar.
Zhou Xiaochuan, the central bank governor, said in April that China's foreign exchange reserves were excessive, so the PBOC may set up a precious metals fund to diversify investment.
"China's gold import policies set almost no limits," Cheng said.