China Loves Silver: Déjà Vu All Over Again

Frank Giustra on Silver

Guest post today from our friend, Frank Giustra. Giustra is CEO of the Fiore Group and a veteran mining financier. Among many other well known successes, Frank was the founder Silver Wheaton, which became Wheaton Precious Metals, a flagship of the streaming model. Original post.

History, as they say, doesn’t repeat itself, but it often rhymes. And right now, the precious metals market is hearing a familiar, resonant rhyme from the East—one that echoes with the weight of silver bullion and the resolve of a nation determined never to be humiliated again.

Let’s rewind. From the mid-1500s to the early 1800s, China wasn’t just a participant in the global economy; it was the global economy. For nearly three centuries, it sat as the world’s largest economy, absorbing an astonishing 30-50% of the entire planet’s silver production. This metal wasn’t just a commodity; it was the very backbone of the Middle Kingdom’s monetary system, its taxation, and its unparalleled commercial growth. China produced everything the West desired—silk, porcelain, tea—but desired almost nothing the West produced – deeming them inferior or unnecessary. The result? A massive trade surplus for China, draining Britain’s silver reserves at a clip of tens of millions of ounces annually by the 1830s.

This imbalance wasn’t sustainable. As British silver reserves depleted, the empire devised a monstrous solution: opium. Addict a nation, reverse the silver flow. When China rightly resisted, the gunships arrived, forcing the “unequal treaties” upon a weakened dynasty. Thus began what Beijing today calls the “Century of Humiliation.”

Now, fast forward. This week, on January 1, 2026, a new policy takes effect: China will begin restricting silver exports. The world’s second-largest silver miner and, critically, its most pivotal refiner and net exporter, is deliberately tightening the physical tap.

Déjà vu? On the surface, perhaps. But the melody is fundamentally different this time. This isn’t a weak Qing dynasty helpless before foreign cannons. This is a modern superpower, economically muscular and strategically patient. Recall Mao’s iconic 1949 declaration: “Ours will no longer be a nation subject to insult and humiliation. We have stood up.” They have, and they have no intention of ever sitting down—or being pushed around. Witness their calm, unyielding response to the latest tariff threats from the West; there was no buckling, only a steadfast middle finger to economic bullying. This silver move is a policy of strength, not desperation.

So, if the historical parallel is a rhyme, not a repetition, what’s the modern verse? It’s a powerful bullish catalyst in a market already screamingly tight. China’s restrictions aren’t happening in a vacuum; they are the spark landing in a tinderbox of structural deficits.

Consider the landscape:

1. The Industrial Juggernaut with Inelastic Demand.

Forget the 19th-century tea trade. Today’s silver demand is powered by the inexorable forces of electrification and artificial intelligence. Industrial demand hit a record ~680 million ounces in 2024. Solar is the undisputed king, consuming over 200 million ounces annually—a figure projected to soar past 450 million ounces by 2030. Why? Because every AI query needs electrons, and the marginal electron is increasingly solar. Silver’s conductivity is unmatched, and substitution is neither easy nor quick. As one analyst bluntly put it, solar demand is inelastic to prices up to $134/oz. We’re not there yet. EVs use double the silver of ICE cars. Samsung’s next-generation solid-state battery uses a silver-carbon composite anode. This demand isn’t speculative; it’s baked into our technological future.

2. A Supply Crisis Decades in the Making.

Here’s the rub: 72% of global silver supply comes as a by-product of mining for copper, lead, zinc, and gold. You cannot simply “decide” to produce more silver. The market has seen essentially no net supply growth for 25 years. Meanwhile, truly *primary* silver deposits are geological unicorns.

3. The Physical Squeeze is Already Here.

The paper markets on the COMEX can nap in complacent contango, but the real physical market—the London OTC—is screaming. We are witnessing the deepest backwardation in decades. Backwardation, for those who need a reminder, is when the spot price trades above future prices. It’s the market paying a panic premium for metal right now because later might be too late. A year ago, the curve sloped gently upward. Today, with spot near $80, the forward curve is inverted, sloping downward to $73. This isn’t a theory; it’s a fact of stressed vaults and frantic industrial buyers. Premiums in Asia have been hitting $10-14 over spot. The “Great Silver Squeeze” of October 2025, which saw lease rates spike to 40%, was a warning shot. China’s export restriction is the next, much larger, volley.

4. Monetary Metal, Re-awakened.

Let us not forget silver’s 5,000-year resume as money. It was the backbone of the Roman Denarius and the Spanish Peso that fueled China’s last silver age. As faith in unbacked fiat currencies erodes, the remonetization trade is a slow-burning fuse. China’s actions, alongside persistent central bank gold buying, highlight a global shift toward tangible asset sovereignty. As historian Roy Jastram illustrated in The Golden Constant, precious metals preserve purchasing power across centuries. Silver, the “poor man’s gold,” has a habit of catching up violently.

When Elon Musk states that China’s move “is not good” because “silver is needed in many industrial processes,” you should listen. He is describing a critical path dependency for his own industry and the broader energy transition.

So, where does this leave us?

The 19th-century silver imbalance led to war and humiliation for China because it was a fragile empire facing a ruthless industrializing power. The 21st-century imbalance is leading to a different kind of conflict: a bare-knuckle fight for resources in a physically constrained market. This time, China holds immense cards—control over refining, dominant industrial demand, and the political will to secure its own future.

The outcome will not be humiliation. It will be a repricing.

The stars are aligning: multi-decade backwardation in London, inelastic solar demand, by-product dominated supply, a sleeping speculative crowd, and now, a net-exporting superpower strategically hoarding its stash.

The “Century of Humiliation” began with a struggle over silver. As that century’s legacy finally recedes, silver is again at the forefront—this time, as an instrument of sovereign strength and a beacon for one of the most asymmetric bets in the commodity space.

The rhyme is clear. But the stakes have changed utterly.