For most Chinese, gold means more than a durable jewellery-making material and investment vehicle.

The lustrous, yellowish precious metal has long been a symbol of wealth, elegance, royalty and power.

"Chinese people simply feel gold is better when shopping for jewellery or when considering making investments,?said Zhang Yongtao, deputy secretary-general of the China Gold Association.

The "gold-is-better?mindset is the main reason for China's gigantic demand for gold, and the reason overseas producers are jumping into China's lucrative, fast-growing market, he said.

China's gold market is expected to experience robust growth this year, as international gold prices are rising and the country's top regulators are planning to slash import tariffs and the consumption tax on gold merchandise, industry experts said.

China is poised to lower, "by a large margin,?the gold import tax rate from 38 per cent, as the country is accelerating the opening of its gold market, Zhang told China Business Weekly.

China terminated, in April 2001, its tight control over the buying and selling prices of gold. The nation's first gold exchange, in Shanghai, opened in 2002.

The People's Bank of China (PBOC), the nation's central bank, lifted, in March, licensing restrictions related to gold processing, production, wholesaling and retailing.

PBOC officials said local and joint-venture gold jewellery makers no longer have to obtain permits from the central bank to start gold-related businesses.

China's top taxation authorities are considering eliminating the 5-per-cent consumption tax on gold ornaments, he said.

The country began charging the consumption tax on gold, at a rate of 10 per cent, in 1993, when gold was classified as a "luxury merchandise.?

In 1994, China readjusted the tax rate to 5 per cent to boost listless domestic demand as the international gold price tumbled.

"The 5-per-cent consumption tax should be abolished as soon as possible, as regulators no longer consider gold to be a luxury merchandise, and they are encouraging the hoarding of gold,?Zhang said.

Although tax cuts on gold imports would affect domestic gold prices in the short run, China's gold jewellery market would grow, Zhang predicted.

Anglo American Plc, the London-based mining giant, reported, earlier this year, the company's combined sales of platinum, gold and diamonds in China were worth approximately US$1 billion last year.

The firm predicted surging demand in China this year.

Chow Sang Sang, the Hong Kong-based jewellery retailer that entered the Chinese mainland's market in 1997, said it would welcome elimination of the tariffs.

About 40 per cent of the company's gold jewellery are foreign-brands.

Many international gold jewellery makers, anticipating the possible tax rate cuts and coveting China's huge market potential, have been trying to partner with Chinese jewellery retailers in recent months, he said.

Jewellery sales in China have rocketed to 100 billion yuan (US$12.08 billion) from 100 million yuan (US$12.08 million) in the past two decades, as many well-off Chinese have adopted Western styles and fashions.

"The wedding season in China generally begins on May 1. That is one of the busiest days of the year for holding weddings. Overseas gold jewellers clearly hope to strengthen their foothold before that,?he added.

Gold ornaments ?which have become less popular in recent years as shoppers started buying items made of platinum, diamonds, pearls and jade ?still play an integral role in Chinese weddings: They are given as gifts to wish couples financial security.

China's jewellery market was virtually dominated by gold ornament sales from 1982 to 1991. Since 1992, however, jewellery made with other precious metals and stones have gained popularity.

China's gold output last year reached a record 200.6 tons. That was more than double the country's gold output, of 100 tons, in 1995.

China last year became the world's fourth-largest gold consumption market, even though the country's per capita consumption of the precious metal was 0.16 gram, much less than the world's average of 0.7 gram.

Gold prices in China will increase, as international gold prices continue to hover around US$420 per ounce, almost a 15-year high, said Gao Rukun, an expert with the China Gold Economic Research Centre.

The weak US dollar has helped boost China's trade of gold to other countries, while declining consumer confidence in the US economy and rising global oil prices are causing investors to turn to gold for stability, she said.

Gold prices began to rise in China after the nation opened the Shanghai Gold Exchange in 2002. Gold trading prices started at 83 yuan (US$10.03) per gram two years ago and have since reached 112 yuan (US$13.53) per gram.

That increase was more than 30 per cent.

Soaring gold prices have lured commercial banks, anxious to boost their intermediary businesses, and individuals, seeking alternative investment channels, into the market, Gao said.

Investment-oriented trading accounted for 40 per cent of the transactions last year in Shanghai's gold exchange. That was up 10 percentage points over 2002.

Bank of China, one of the country's largest State-owned lenders, recently launched its gold trading agency service, which is aimed at individual investors.

Some other major commercial banks plan to open similar businesses.

PBOC Governor Zhou Xiaochuan encouraged, earlier this year, the establishment of a gold futures trading platform so that gold production and processing enterprises could hedge their risks.

(Business Weekly 04/20/2004 page1)