China Aims to Boost Underground Gold Reserves, Output (Updat

China Aims to Boost Underground Gold Reserves, Output (Update2)

By Richard Dobson and Li Xiaowei

March 20 (Bloomberg) -- China, the world’s biggest gold producer, will seek to increase its underground gold reserves by 800 metric tons and raise production to 290 tons this year, the Ministry of Industry and Information Technology said.

The government aims to encourage industry mergers so the top 10 gold producers account for more than half the nation’s output, according to a statement on the ministry’s Web site, citing Deputy Minister Miao Yu. The country’s output was 282 tons last year, the statement said, without elaborating.

Gold climbed 8.6 percent this year as investors sought to protect their wealth amid the worst financial crisis since the Great Depression. The Federal Reserve may buy more than $1 trillion in government and mortgage debt to help end the recession and the credit crisis, it said this week, spurring a slump in the dollar and a gain in gold.

Shandong Gold Mining Co., Zhaojin Mining Industry Co., Zijin Mining Group Co. and Lingbao Gold Co. are among China’s biggest producers.

Gold demand in China, the world’s second-largest consumer after India, may stagnate as volatile prices dissuade buyers and industrial usage drops because of the economic slowdown, Hou Huimin, vice chairman of the China Gold Association, said in December. He estimated annual consumption at about 360 tons.

The country has the world’s biggest foreign-exchange reserves at $1.95 trillion, with about 600 tons of gold, according to data compiled by Bloomberg. Gold for immediate delivery traded little changed at $955.83 an ounce at 1 p.m. in Shanghai. The price reached a record $1,032.70 last March.

To contact the reporters on this story: Richard Dobson in Shanghai at rdobson4@bloomberg.net

Last Updated: March 20, 2009 01:07 EDT

http://www.bloomberg.com/apps/news?pid= ... ommodities