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Mills, an 18-year-old from the southern US state of Kentucky, wept as outgoing Miss World Kaiane Aldorino of Gibraltar placed the tiara on her head and led her to a diamond-shaped throne marking the pageant's 60th anniversary.
The 1.75-metre (5'9") beauty in white -- a professional model listed with the Elite Models agency -- waved to the cheering crowd at the 2,000-capacity Beauty Crown Theatre in the resort town of Sanya on Hainan island.
During the two-hour competition, which annually draws a global television audience of about one billion, Mills said her month spent touring China with the other 114 Miss World hopefuls had made a "big impact" on her life.
Botswana's Emma Wareus was second, and Venezuela's Adriana Vasini placed third in the pageant, which was first held in 1951.
The pageant got off to a colourful start with a performance by dancers and drummers from China's Li ethnic minority group, who mainly live on Hainan island, which was hosting the event for the fifth time in eight years.
Before the contestants whirled in national costume for the "Dances of the World" segment, viewers were treated to a video montage of the women's whirlwind tour of China -- from the Great Wall to the shopping malls.
Early favourite Mariann Birkedal of Norway, listed by British bookmaker William Hill as the woman to beat ahead of Mills, finished in the top seven.
A win for Norway could have caused a stir in Beijing, where the government is furious that the Oslo-based Nobel committee awarded this year's Nobel Peace Prize to jailed Chinese dissident Liu Xiaobo.
Aldorino, 24, said she had enjoyed her year as Miss World, saying that in all the countries she had visited, one thing had remained the same: "The smile on a child's face, and that's what has captured the moment".
The competition emphasises the importance of charity work.
Miss "Beauty with a Purpose" -- Kenya's Natasha Metto, who has worked on combatting an epidemic of parasitic Jigger fleas in her country -- earned a "fast-track" spot in the final group of 25, but was then eliminated.
Ireland's violin-playing Emma Waldron, who won the talent contest and finished in the top five, wowed the audience by greeting them in Chinese, while Miss China, Xiao Tang, spoke mostly in English.
The event rivals the Miss Universe pageant owned by US tycoon Donald Trump, which was won by Mexico's Jimena Navarrete in August.
In 1951, Sweden's Kiki Hakansson became the first Miss World. Oscar-winning American actress Halle Berry was a finalist in 1986.
Venezuela and India have produced the most Miss Worlds, with five titleholders each. Bollywood star Aishwarya Rai took the crown in 1994.
In 2002, the pageant was moved from Nigeria to Britain after more than 200 people died in clashes sparked when a newspaper suggested the Muslim prophet Mohammed would have chosen a wife from among the contestants had he been alive.