China introduced a new export system for silver on January 1, 2026. It is initially set to apply until December 31, 2026. (As we reported.) However, it is expected that this regulation will be extended if it achieves the success desired by the Beijing government. And once one delves a little deeper into the ‘technical’ aspects of this new regulation, it quickly becomes clear that the strategic success of this measure is absolutely certain.
For China, and indeed for the entire rest of the world, a great deal is at stake here, because in the last two decades, the Middle Kingdom has not only built up enormous capacities for silver refining but has also ensured, through clever contracts with silver producers, that these capacities are fully utilized.
As in the field of solar module manufacturing, China has also planned and acted extremely generously here. Not only have capacities been built that far exceed China’s domestic demand, but silver, lead, and zinc mines have also been paid prices for their ore or concentrate that were significantly above the world market price.
High Investments in Mid-Term Strategic Dominance
This extra remuneration was gratefully accepted by producers, as the Chinese premiums helped many producers economically survive the difficult years before 2024.
While China paid a rather high price for these contracts for a long time, the strategic benefit was always significantly greater and ultimately justified these ‘investments in strategic dominance.’ The result was a development similar to what was observed in the rare earths sector in the 1990s.
Paying higher prices to silver sellers, especially from South America, had two consequences that perfectly suited the Beijing government’s plans. Firstly, strong and deep business relationships were formed with the producers. Giving them up now makes no real sense for either side, creating a certain moat against Western competition.
Rare Earths as a Model for Silver
In addition, competitors from Europe and the USA were increasingly pushed out of the market. Because China was willing to pay significantly higher purchase prices for the ore or concentrate, they found less and less material available for processing.
This created negative economies of scale for Western competitors, while the Chinese industry benefited from higher processing volumes. As a result of this development, more and more smelters in the West withdrew from the business, which was no longer profitable for them, and exited the market.
As a result, China is currently in the comfortable position of being responsible for approximately 70% of the world’s refined silver. China’s dominance is therefore not quite as extensive as with rare earths, where this share stands at approximately 90%, but still significant enough to strategically control the West. For whoever determines who receives silver and in what quantities indirectly also dictates the development, for better or worse, of industries in other countries.
