Most Western silver analysis starts and ends with COMEX and the LBMA. That’s understandable — New York and London have set silver prices for over a century, and most English-language financial data flows from those two centers. But there’s a third major node in the global silver market that gets far less attention: China.
China is simultaneously one of the world’s largest silver producers, its largest industrial silver consumer, and home to hundreds of millions of retail investors who buy physical silver. It runs its own exchanges with its own pricing in its own currency. And as China’s economy has grown and its financial markets have deepened, the country’s influence on silver pricing has grown with it.
Understanding how China fits into the global silver picture is increasingly essential for anyone who wants to understand silver seriously.
Two Exchanges, Different Purposes
China has two major exchanges that handle silver, and they serve distinct functions.
The Shanghai Gold Exchange (SGE) is the larger and more internationally recognized of the two. Established in 2002 and supervised by the People’s Bank of China (PBOC), the SGE is primarily a physical exchange — participants buy and sell actual metal, with settlement in deliverable gold and silver. It is the world’s largest physical gold exchange by volume, and silver trades alongside gold on the same platform. Prices are quoted in yuan (CNY) per gram, not in U.S. dollars per troy ounce as in Western markets.
The SGE’s membership includes China’s major commercial banks (ICBC, Bank of China, China Construction Bank), jewelry manufacturers, industrial users, and authorized institutional investors. Since 2014, the SGE has operated an international board that allows overseas participants to trade on the exchange, a deliberate move to extend its global reach and reduce dependence on Western pricing benchmarks.
The Shanghai Futures Exchange (SHFE) operates differently. Established in 1999 through the merger of older commodity exchanges and supervised by the China Securities Regulatory Commission (CSRC), the SHFE is a futures exchange — it trades standardized contracts for future delivery of silver, copper, aluminum, zinc, and other commodities. Silver contracts on the SHFE are denominated in yuan per kilogram, with a standard contract size of 15 kilograms. Like COMEX, the SHFE sees substantial speculative trading; not all contracts result in physical delivery. But unlike COMEX, the SHFE’s participant base is primarily domestic — Chinese institutional investors, trading firms, and large retail participants.
Together, these two exchanges give China a domestic price discovery mechanism that operates independently of, but in constant dialogue with, London and New York.
China’s Position in the Silver Market
To understand why Chinese exchanges matter, you need to understand the scale of China’s presence in physical silver markets.
On the supply side: China is consistently among the world’s top three or four silver-producing nations, alongside Mexico and Peru. Chinese mines produce roughly 100–120 million troy ounces annually — approximately 10–13% of global mine supply — from dedicated silver mines as well as silver produced as a by-product of lead, zinc, and copper mining.
On the demand side: China’s industrial silver consumption is the largest in the world, driven by its dominant position in solar panel manufacturing, electronics production, and electrical component fabrication. When the Silver Institute publishes annual demand data, Chinese industrial consumption regularly accounts for 15–20% of total global industrial silver demand. China makes a very large share of the world’s solar panels, printed circuit boards, and consumer electronics — all silver-intensive products.
On the investment side: Chinese retail investors have significant appetite for physical silver as a store of value and speculative asset. This demand surges during periods of economic uncertainty or when silver prices are trending upward. Unlike Western retail investors who often access silver through ETFs, Chinese retail participation tends to skew toward physical metal — bars, coins, and small ingots available through banks and exchanges.
The Yuan Premium and What It Signals
Because Chinese silver markets are not seamlessly integrated with Western markets — imports and exports of silver are subject to government authorization, and cross-border capital flows are regulated — the price of silver in Shanghai doesn’t always perfectly track London or New York.
The difference between the yuan-equivalent price in Shanghai and the international spot price is called the Shanghai premium (when Shanghai is higher) or the Shanghai discount (when it’s lower). This spread is actively watched by traders and analysts as a real-time signal of domestic Chinese demand conditions.
A sustained Shanghai premium indicates that Chinese buyers — industrial users, investors, or both — want more silver than is currently available domestically, and are bidding prices up. It signals that import demand is likely to increase, putting upward pressure on global supply. When large volumes of silver flow into China to arbitrage the premium, that metal is absorbed into domestic use and industrial stockpiles, tightening global supply.
A Shanghai discount is rarer and typically reflects weakness in domestic demand or an oversupply of imported silver relative to local consumption.
The premium/discount isn’t always large — in normal markets it’s measured in fractions of a percent — but during periods of significant Chinese demand surges it can widen meaningfully. Understanding the direction and magnitude of this spread provides a view into Chinese silver demand that you can’t get from Western price data alone.
The East-West Price Relationship
Global silver prices are continuously arbitraged between markets. When a significant price difference opens up between Shanghai and London — after adjusting for exchange rates, import duties, and logistics costs — traders move metal to capture the spread, which closes the gap. This arbitrage mechanism means that over any reasonable time horizon, silver prices in China and the West converge.
But the process of that convergence matters. When Chinese demand drives a Shanghai premium, the arbitrage that closes it involves shipping physical silver into China. That silver has to come from somewhere — typically from London vault holdings, from freshly mined supply, or from other markets. If Chinese demand is sustained, the global supply available to other buyers gets tighter.
This is why analysts who focus exclusively on COMEX positioning and LBMA data can miss important structural signals. Chinese demand isn’t noise in the Western data — it’s a fundamental driver that manifests through tighter physical supply and, eventually, price.
The SGE’s Global Ambitions
The SGE has been deliberately positioning itself as an alternative center of gravity in global precious metals pricing. The launch of the international board in 2014, the introduction of yuan-denominated gold and silver benchmarks, and sustained diplomatic efforts to get the yuan-priced “Shanghai Gold Fix” recognized internationally are all part of a long-term project.
The motivation is partly economic: China consumes enormous quantities of silver and gold but has historically been a price-taker, purchasing at prices set in London and New York. A world in which Shanghai sets (or co-sets) the global benchmark is a world in which China has more pricing power in markets for metals it dominates as a consumer.
The motivation is also geopolitical. The yuan’s internationalization is a stated Chinese policy goal, and having the world’s most important commodity exchanges price in yuan rather than dollars would significantly advance that goal. Silver’s role in this is secondary to gold’s, but the two markets are deeply linked — if the yuan gains traction as a pricing currency for gold, silver will likely follow.
How far this project advances depends on factors well beyond silver markets: U.S.-China financial relations, the pace of yuan convertibility, and the degree to which international investors are willing to use Chinese exchanges. Progress has been slower than Chinese planners hoped, and Western-dominated exchanges remain the global reference. But the direction is clear, and the trajectory has been toward greater Chinese influence in pricing, not less.
Why Western Silver Investors Should Care
If you’re buying silver coins in Ohio or watching a COMEX futures chart in London, Chinese exchanges might seem remote. But several things make them directly relevant.
Demand signals. The Shanghai premium is one of the best real-time indicators of genuine physical demand — the kind that moves actual metal, not just paper contracts. Watching it costs nothing and provides information that COMEX open interest data doesn’t.
Industrial demand reality. China’s industrial consumption of silver is not an abstraction — it’s the reason the annual Silver Institute demand data looks the way it does. Understanding that a significant portion of silver goes into Chinese factories making solar panels and electronics provides crucial context for interpreting supply/demand balances.
Supply chain integration. Silver mined in Peru and Mexico regularly ends up in Chinese factories via London vaults. The global silver supply chain routes through all three major market centers. Developments in any one of them affect the others.
The longer-term structural picture. If China continues to consume growing quantities of silver for the energy transition — as it almost certainly will, given its dominant position in solar manufacturing — and if Chinese retail investment demand remains significant, then China’s domestic market dynamics will be an increasingly large input into the global price equation.
The Bottom Line
COMEX and the LBMA are where silver’s price is formally discovered today. But the physical reality that underlies those prices is increasingly shaped by China. China mines it, manufactures with it at enormous scale, and buys it in quantity for investment. The SGE and SHFE are the institutional infrastructure through which that demand is expressed and priced.
Western silver analysis that ignores the Shanghai dimension is working with an incomplete map. The fundamentals that ultimately drive silver prices — supply and demand for physical metal — run through Shanghai as much as they run through New York and London.
Sources
[1] Shanghai Gold Exchange, exchange information and international board details. sge.com.cn
[2] Shanghai Futures Exchange, silver contract specifications. shfe.com.cn
[3] The Silver Institute / Metals Focus, World Silver Survey (annual) — country-level supply and demand data. silverinstitute.org
[4] U.S. Geological Survey, “Mineral Commodity Summaries: Silver” (annual) — producing country data. usgs.gov
[5] People’s Bank of China (PBOC), oversight documentation for the Shanghai Gold Exchange. pbc.gov.cn
[6] World Gold Council, analysis of the SGE international board and yuan gold pricing. gold.org