With the Lunar New Year just around the corner, gold is abundant in China, and not just for decorative purposes. The nation has been named the largest producer and importer of gold, according to the China Gold Association and Commerzbank.

According to the latest data from the industry association, the Mainland produced the most gold in the world in 2012, hitting a record high of 403.05 tonnes, making it the largest  producer of the precious yellow metal, for the sixth year in a row.

Gold continues to attract attention in the wealth management industry as a store of value at times of ecomomic uncertainty and due to a perceived excess of demand over supply. At the time of going to press, spot gold traded around $1,674 per ounce.

The country’s gold output increased 11.66 per cent from a year earlier and was almost 100 times that of 1949, when the country produced just 4.07 tonnes, the China Gold Association said this week.

In addition to being the world largest producer, China is also the world largest importer of gold - according to data provided by the Census and Statistics Department of the Hong Kong government, China imported record quantities of gold from Hong Kong in December.

Germany’s Commerzbank AG commented on the figures in its latest commodities report: “Year on year, imports were up to 114.4 tons, almost trebling. At the same time, “only” 19.6 tons of gold were exported to Hong Kong, the smallest volume since February. The figures suggest strong demand for gold within China itself.”

The bank added that over the year as a whole, China imported a net quantity of 557.5 tons of gold from Hong Kong, likewise a record and 47 per cent up on 2011.

Assuming that China itself produced almost 400 tons of gold last year, the total Chinese gold demand will have been over 950 tons, consequently meaning that China has overtaken India as the world’s number one consumer of gold on a yearly basis.

“Owing among other things to higher duties on gold imports, Indian gold demand is likely to have fallen last year to just over 700 tons. China is thus filling the gap left by India,” the bank said.

With China’s population getting increasingly wealthier, Commerzbank predicts that demand for gold should remain high: “Since the country cannot meet demand from its own gold resources, and the central bank is topping up its gold reserves, gold imports can be expected to remain at a high level, which should support prices,” the bank concluded.