China produced 270.29 tons of gold last year, up 12.67 percent from 2006, which made it the world's second largest bullion producer, statistics from the China Gold Association show.

The largest producer was South Africa, whose output was just two tons more than China.

According to the National Development and Reform Commission, from 2006 to 2010, China's gold production target is 1,300 tons. During that period, China also aims to increase its gold base reserve by 3,000 to 3,500 tons.

"South Africa has been the biggest gold producer since 1905. However, China is going to challenge its position," said gold analyst Zhou Hongtao.

China's gold output for the first time reached 100 tons in 1995 and doubled that amount by 2003. In the past five years, China's gold production rose 34.84 percent.

New discoveries have paved the way for China's rise in output, with five big mines found in China last year. Meanwhile, other traditional producers, including South Africa, the United States and Australia, reduced their output in recent years.

China was the fourth largest gold producer from 2000 to 2006.