Silver Price Disparity in China: A Tax-Driven Phenomenon

China's silver market is experiencing an unusual phenomenon where silver costs $8 more in Shanghai than in London or New York. This price difference may seem counterintuitive, given that China has traditionally been a net exporter of silver. However, a closer look at the country's tax structure reveals why this is happening.

The key to understanding this disparity lies in China's import tax on silver. According to Metals Focus and the Silver Institute, a refinery importing base metal concentrate pays no import value-added tax (VAT) on the silver content if the refined bullion is re-exported. However, 13% VAT is levied on the total value otherwise.

This tax structure creates an incentive for refineries to export refined silver bars rather than sell them domestically. As a result, metal that would otherwise be available to Chinese buyers is being pulled out of the country, leaving less behind and supporting a higher local price.

China's silver exports reached a record 162 million ounces last year, while imports were almost non-existent. This has led to a significant drawdown in domestic exchange stocks, which fell by 37.3 Moz during 2025 to 47.1 Moz, a ten-year low. The survey attributes this fall partly to strong outflows rather than increased demand.

India also has its own import tax on silver, with a 15% duty and a 3% sales levy, which creates an additional barrier for foreign bullion imports. Although India's premiums are quoted over official domestic prices, they sit below the compounded tax floor, indicating no genuine demand pressure.