China's strategic silver takeover: A calculated move to drain the west

A Hidden War for Economic Dominance

While the world has been focused on the geopolitical tensions between China and the West, a more subtle battle has been unfolding in the global financial markets. China, through a series of calculated moves, has been quietly accumulating vast quantities of gold and silver. This move has signaled a potential shift in the global economic landscape and highlights the developing countries’ need for exorbitant amounts of resources.

Silver: China's Secret Weapon

In addition to its gold hoarding, China has also been strategically increasing its silver reserves. The Shanghai Metals Exchange has seen a significant surge in silver trading volume, with prices consistently higher than those on Western exchanges. This suggests that China may be deliberately driving up the price of silver to drain the West's resources.

In 2023, China reportedly had a silver reserve of 71,000 metric tons, second only two the silver-producing powerhouse country of Peru, which boasted 98,000 MT in reserve. The U.S. came seventh on the list of top silver reserves, with a stockpile with 23,000 MT, behind Poland (65,000 MT), Russia (45,000 MT), Australia (27,000 MT) and Chile (26,000 MT). 

 Silver price in China as of today: 32.77 USD/Oz

Aug.21, the market data on SGE/SFE. pic.twitter.com/VtJIDJd851

— Bai, Xiaojun (@oriental_ghost) August 21, 2024

The Implications for the West

The rising price of silver could have significant implications for Western economies, particularly those that rely heavily on industrial metals. If the price of silver continues to rise, it could increase production costs for a wide range of industries, from electronics to solar panels. This could lead to higher consumer prices and a further slowdown of economic growth as China out produces the West in electronics and solar panels.

The Growing Demand for Silver

China is leading the way in solar production, to the point a recent Bloomberg article claimed they are producing more panels than can be put to use. Bloomberg reported in May that China’s silver imports reached a three-year high of 390 tons in December and 340 tons in April. The monthly five-year average is 310 tons.

Reports have shown China has produced so many solar panels that some Chinese citizens have put them to use as garden fences. About 80% of all panels made in the world originate from China.

China's importing appetite

Silver imports are notably increasing under Chinese President Xi Jinping and, most recently, have spiked in June and July, with both months surpassing net imports of more than 400 tonnes. Last year at this time, the net importing of silver into China did not surpass 200 tonnes.

U.S. President Joe Biden and his administration slammed China’s trade practices in a memo released in May, claiming its over manufacturing of solar equipment is harming the West.

“The U.S. Trade Representative, the Department of Energy and the Department of Commerce will closely monitor import patterns to ensure the U.S. market does not become oversaturated and will explore all available measures to take action against unfair practices,” the memo states. 

India's Growing Demand

India has also been a major buyer of silver, importing significant quantities from the West in recent years. India's recent decision to reduce its import duty on silver will further increase its demand for the metal.

The Potential for a Silver Squeeze

Analysts warn that the growing demand for silver, coupled with limited supply, could lead to a "silver squeeze" similar to the silver squeeze of 1980. If investors begin to panic and rush to buy silver, the price could skyrocket, causing significant disruptions to the global economy.