Tsingtao Brewery Co Ltd, China's best known beer brand, posted a 63.4 percent increase in first-half profit as rising Chinese incomes boosted demand for beer and a taste for more expensive brews.

China's beer market, where a 640-ml bottle can cost just 12 U.S. cents, is the world's largest by volume and grew more than 16 percent in the first half, according to Merrill Lynch.

Last year, the market grew nearly 15 percent to 351.5 million hectolitres -- a third consecutive year of double-digit volume growth.

Tsingtao, 27 percent-owned by top U.S. beer maker Anheuser-Busch Cos. Inc., has come under pressure from foreign rivals SABMiller, Heineken and Carlsberg and rising raw material costs.

January-June net income increased to 347.57 million yuan

($45.92 million) from 212.74 million yuan a year earlier.

The sales volume of Tsingtao's top four brands reached 19.04 million hl for year-over-year growth of 24.6 percent, the firm said in a statement.

Tsingtao hopes to maintain 12 percent sales growth this year to 50.8 million hectolitres against an 11.5 percent gain in 2006.

The brewer, established a century ago in the port city of Qingdao, should post a 5.6 percent rise in annual profit to 473.04 million yuan, according to a mean forecast of 12 analysts polled by Reuters Estimates.

Tsingtao hopes the 2008 Olympics -- it is a co-sponsor and will host sailing events -- will spur sales and boost its brand.

The firm's Hong Kong-listed shares rose 45 percent in the first half, beating a 16 percent gain on an index of Chinese companies traded in Hong Kong.

The stock trades at more than 49 times forecast earnings, roughly in line with local rival Yanjing Brewery Co.

($1=7.567 Yuan)