GOLD OUTPUT. Chinese sales staff member walks along an aisle paved with 300 kilograms of gold bars, estimated to worth over 100 million yuan (USD16 million) to promote a gold exchange house in southwest China's Yunnan province. File photo (taken December 2012) by AFP

SHANGHAI, China - Gold production in China, the world's second largest market for the precious metal, surged nearly 12% year-on-year last year despite a slowdown in the domestic economy, state media reported.

Output rose to 403.1 tonnes in 2012, up 11.66 percent from 2011, the official Xinhua news agency said late Saturday, February 23, quoting figures from the Ministry of Industry and Information Technology.

China is the world's second largest consumer of gold after India. A global industry group, the World Gold Council, has put China's consumer demand for gold at 776.1 tonnes last year, flat from 2011.

The council attributed the stable Chinese demand to a slowdown in the domestic economy and consolidation in gold prices which discouraged investors, according to its latest report released this month.

China's economy -- the world's second largest -- grew at its slowest pace in 13 years in 2012, expanding 7.8% from the year before.

But the economy has been showing renewed vigour since late last year, with growth accelerating in the final 3 months of 2012 to 7.9%, snapping 7 straight quarters of weakening expansion.

"The signs of economic improvement bode well for gold demand in China, although the indications are for a steady firming of demand rather than for strong growth," the World Gold Council said.

China's Ministry of Industry said domestic gold prices dropped in December last year as worries over the US "fiscal cliff" caused uncertainty.

US lawmakers clinched a last-gasp deal to avoid the fiscal cliff of tax hikes and spending cuts.

China's gold producers recorded a combined 35 billion yuan ($5.6 billion) in profits last year, up just 4% from 2011, the ministry said. - Rappler.com