By Charlie Garcia
China controls around 70% of the silver that Big Tech, AI and solar power desperately need. Beijing is about to lock the gates.
China is restricting silver exports because it needs the metal - and has figured out something America hasn't.
A message to every Western manufacturer: You want to build the energy future - negotiate with Beijing.
Silver prices (SI00) are getting crushed this week. By Thursday, it may not matter.
On Jan. 1, China's new export-licensing regime takes effect, putting government gatekeepers between 121 million ounces of annual silver exports and the rest of the world. That means 60%-70% of the globally traded refined supply will require Beijing's permission to leave the country.
Wall Street spent Monday hyperventilating about margin hikes on silver traders. CNBC trotted out the usual suspects warning about &#34;speculative excess.&#34; The X platform was full of people who couldn't spell backwardation six months ago suddenly explaining why silver is overvalued.
They're all missing the story. China just weaponized silver. And they did it while Americans were busy arguing about whether bitcoin (BTCUSD) is real money.
Read: 'The bulls are definitely spooked': Has silver's stunning rise this year run out of steam?
The playbook you've seen before
China doesn't invent new tricks. It just runs the old ones on new commodities.
If this feels familiar, it should. China doesn't invent new tricks. It just runs the old ones on new commodities.
In 2010, Beijing started &#34;licensing&#34; rare-earth exports. Not banning them, mind you. Just requiring paperwork. Approvals. Quotas that somehow never quite met demand. The effect was surgical; as prices spiked up to 4,500%, Western manufacturers discovered they couldn't build smartphones or missiles without Chinese permission - and a generation of supply-chain executives learned Mandarin the hard way.
The rare-earth squeeze wasn't dramatic. It was bureaucratic. Death by a thousand forms filed in triplicate.
Silver will see the same treatment starting Jan. 1. Chinese refiners will need government approval to export. The qualification thresholds are 80 tons of annual production capacity and $30 million in credit lines. That's not a regulatory standard. That's a velvet rope designed to keep most current exporters on the wrong side.
China just nationalized the silver trade without nationalizing a single mine.
Why you can't mine your way out
If some intrepid geologist found a massive silver deposit tomorrow morning, you'd see the first ounce around 2040. Maybe.
Here's where silver gets uglier than rare earths.
When China squeezed rare earths, the West eventually responded. Australia's Lynas (AU:LYC), for example, built new capacity. The U.S. reopened the Mountain Pass Rare Earth Mine, owned by MP Materials (MP) - the only rare-earths mine in the U.S. It took a decade of panic, billions in investment and many embarrassing congressional hearings, but alternatives emerged.
Silver doesn't work that way.
Between 70% and 80%  of global silver production is byproduct. It comes out of the ground attached to copper, lead, zinc and gold. The silver is incidental. A nice bonus. The economic decision to dig the hole has almost nothing to do with silver prices.
This means you can't just &#34;mine more silver&#34; because silver prices went up. You'd have to mine more copper (HG00) first. And copper miners don't care what silver is doing. They care what copper is doing.
It gets worse. New mine development takes 10-20 years from discovery to production. If some intrepid geologist found a massive silver deposit tomorrow morning, you'd see the first ounce around 2040. Maybe.
The supply cavalry isn't coming. It's geologically stuck in traffic.
The copper-substitution fantasy
&#34;But they'll just switch to copper!&#34; say people who have never retooled a factory.
Yes, copper can theoretically replace silver in solar-power cells. The technology exists. Chinese manufacturer AIKO (CN:600732) announced progress in August. Lab results are promising.
Here's what the lab results don't tell you: Converting a single solar-cell factory to copper takes 18 months. There are 300 such factories worldwide. Maximum parallel conversion capacity is about 60 factories per year. Do the math. That's a minimum of four years to get halfway there, assuming unlimited capital and perfect execution.
Solar manufacturers aren't stupid. They've been absorbing silver's 180% price increase all year. They keep buying because they have no choice. The break-even, where demand destruction actually begins, is $134 an ounce. That's 70% above yesterday's panicked close.
The copper substitution story isn't wrong. It's just slow. And slow doesn't help you when China closes the gates this week.
What Beijing actually wants
Silver is no longer a commodity. It's a strategic asset in a resource war that most Americans don't know is being fought.
Let's stop pretending this is about market dynamics. China added 216 gigawatts of solar capacity in 2023 alone. It's building EVs faster than manufacturers can ship them. China's industrial base inhales silver.
Beijing isn't restricting exports because the government is worried about speculation. China is restricting exports because it needs the silver and has figured out something Washington hasn't. The clean-energy transition runs on metals, and whoever controls the metals controls the transition.
Every solar panel needs around 20 grams of silver. Every electric vehicle needs 25 to 50 grams. Every AI data center requires electricity. OpenAI's Sam Altman is begging utilities for power. Meanwhile, China is locking up the silver used to manufacture the solar panels which generate that power.
This is not subtlety. This is strategy.
China's new licensing regime sends a message to every Western manufacturer. If you want to build the future of energy, you will need to negotiate with Beijing. Maybe your silver shipment will be approved. Maybe there will be delays. Maybe you'll find yourself suddenly interested in Chinese joint ventures and technology transfers.
Funny how that works.
What silver's plunge tells you
If you were looking to buy silver before the export gates shut, Beijing just handed you a discount.
The CME raised margin requirements to $25,000 per contract on Monday. Silver promptly fell off a cliff. The financial press pronounced the bubble over.
They're fighting the last war.
In 2011, margin hikes killed silver because leverage was obscene. You could control $100 of silver with $4 of capital. Then the CME raised margins five times in nine days - and the cascade of forced liquidation was spectacular, sending silver tumbling nearly 30%.
Today's margins are already at 17% of notional value. The speculative leverage has been wrung out of this market for months. Monday's hike isn't a kill switch. It's a speed bump.
What Monday's selling actually accomplished: weak hands got flushed 48 hours before China's policy takes effect. If you were looking to buy silver before the export gates shut, Beijing just handed you a discount.
Timing, as they say, is everything.
What to do now
If you're already long silver, congratulations and condolences. The structural investment thesis for silver is stronger after Jan. 1, not weaker. But you'll need an iron stomach. This market will swing 10% on a rumor and 15% on a tweet. Volatility is the price of admission.
If you're on the sidelines, note that Monday's decline is either a warning or an invitation, depending on your conviction. The case for silver isn't about charts or momentum. It's about whether you believe China's resource weaponization works. They've done it with rare earths. They're about to do it again.
If you want exposure without holding metal, primary silver miners offer leverage to the thesis. But understand that miners come with execution risk, and streamers depend on mines that actually produce.
If you trust nothing but physical silver: There's an argument for keeping metal in your possession. No counterparty risk. No margin calls. Just silver, sitting there, quietly appreciating while bureaucrats in Beijing shuffle export applications into the &#34;pending&#34; pile.
China just told us something important, and it wasn't complicated. Silver is no longer a commodity. It's a strategic asset in a resource war that most Americans don't know is being fought.
The gates are closing. After that, every ounce of Chinese silver that reaches global markets does so because Beijing decided to allow it.
Position accordingly.
Charlie Garcia is founder and a managing partner of R360, a peer-to-peer organization for individuals and families with a net worth of $100 million or more. He has positions in silver and gold.
Agree? Disagree? Share your comments with Charlie Garcia at charlie@R360Global.com. Your letter may be published anonymously in the weekly &#34;Dear Charlie&#34; reader mailbag.
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More from Charlie Garcia:
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-Charlie Garcia
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12-31-25 0925ET

<p>China is set to implement a new export-licensing regime for silver on January 1, restricting 60%-70% of global refined silver supply. This move is seen as a strategic weapon in a resource war, as China controls around 70% of the silver needed for technology and renewable energy. The licensing requirements will limit exports and could lead to significant price increases, with silver prices already under pressure. Unlike rare earths, silver production is largely a byproduct, making it difficult to increase supply quickly. The transition to copper as a substitute for silver in solar cells is slow and costly, further complicating the situation for manufacturers.</p>

China's launches its silver weapon on Jan. 1. What that means for investors and prices.