China's implementation of strict silver export controls, effective January 1, 2026, is raising strategic concerns for India, potentially disrupting supply chains and increasing import dependence. The new regulations require companies to obtain government licenses to export silver, a move that could significantly impact global silver availability and prices.

China's Strategic Play

China, which controls 60-70% of global refined silver, has framed silver as a strategic asset, akin to rare earth minerals. This allows them to leverage it for deals and to favor countries. By controlling exports, China aims to secure its domestic industries, including solar panels, electronics, and electric vehicles, which heavily rely on silver. Only 44 companies have been granted permission to export silver under the new rules, with specific criteria like production capacity and credit lines in place.

Impact on India

India relies on imports from China and Hong Kong for approximately 40% of its silver needs. The new export controls could lead to increased silver prices worldwide, including in India. This is particularly concerning as silver transitions from a mere commodity to a critical mineral, essential for various technological applications.

India's Options and Challenges

The Indian government has urged China to resolve export control-related issues. To mitigate the potential negative impacts, India may need to explore several strategies:

• Diversifying Import Sources: India could seek to diversify its silver import sources to reduce reliance on China.
• Boosting Domestic Production: Increasing domestic silver production could help offset import dependence. Rajasthan holds a remarkable 87% of India's total silver reserves and resources, with key mining areas like Rampura Agucha and Sindesar Khurd. Hindustan Zinc Limited (HZL) is India's largest silver producer, contributing over 90% of the country's total output.
• Strategic Stockpiling: Creating a strategic reserve of silver could buffer against potential supply disruptions.
• Investing in Recycling: Promoting silver recycling can help augment supply.
• Collaboration with Other Nations: Partnering with other countries to ensure a stable silver supply chain could be a viable strategy.

Potential Economic Ramifications

The restrictions on silver exports come at a time when silver prices are already near record highs and expected to rise further. Silver prices have seen sharp increase in recent months. This surge is driven by supply concerns and broader macroeconomic trends, with the metal more than doubling in price in 2025. Increased silver costs could impact various sectors in India, including electronics, jewelry, and solar energy.

Geopolitical Implications

China's control over silver exports highlights the growing importance of critical minerals in geopolitics. As countries compete for resources essential for technological advancement and defense, supply chain security becomes a key strategic consideration. India's response to these export controls will likely shape its approach to securing access to other critical materials and its broader relationship with China.

In conclusion, China's silver export controls present a complex challenge for India. By taking proactive measures to diversify supply sources, boost domestic production, and collaborate with other nations, India can mitigate the potential strategic and economic risks posed by these restrictions.