In China, the price of silver is 17% higher

The difference between the international Silver price and the price paid for the precious metal in China has not been as high in the past three years as it is now, writes Bloomberg. Data from the Shanghai Gold Exchange shows that in the past week the silver price in China was 17% higher than the price set in London. In the last six years, the premium has only been twice higher than this level.

The reason for the rising premium on silver is a temporary tax break in China, which has caused the existing silver reserves to shrink sharply. Silver inventories recorded by the Shanghai Futures Exchange shrank to 115 metric tonnes, down 80% from February this year.

Exporters discovered that they can export silver bars with the label of silver audio cables, making them eligible for a tax exemption. Due to a weakness in the legislation, they can reclaim the 17% tax.

Tax

"It is an open secret in the local silver industry that much of the export is an attempt to take advantage of the tax break. There is not much demand for silver cables for stereo systems, yet many exports are classified as such"Liu Xu, a precious metals analyst at Capital Futures in Beijing, told Bloomberg.

Until 2010, China was a net exporter of silver, after which it became an importer of the precious metal due to a sharply increasing demand for solar panels. A lot of silver is required for the production of solar panels, which is why exports turned into imports.

The Chinese government wants to close the weak spot in the legislation as soon as possible, because the high premium on silver in China itself means that more silver is smuggled into the country. On 15 October, Chinese customs announced that they had seized 400 kilos of Silver bars that had entered the country through smuggling.

Silver price in China is 17% higher than the international price in London