The price and premium of Chinese Silver Panda coins
Compared to American Eagles, Austrian Philharmonics, Canadian Maple Leafs, and other well-known legal tender silver bullion coins that have been minted from their inception in unlimited quantities, the Chinese Silver Pandas have an annual limited edition, although subject to changes. This, coupled with the changing panda bear motif, has contributed to making older dated issues fetch a considerable collector’s premium in the secondary market. In 2012, as a response to the heightened demand, the Chinese Central Bank increased the annual mintage limit of the most popular 1 ounce weight to eight million pieces per year, the highest ever. While the larger supply has somewhat dampened the coin’s premium in the secondary market, this could prove to be a perfect window of opportunity for longer-term investors given the potential upside these coins carry.
The future value and premium appreciation of Chinese Silver Panda coins are supported by several conclusive facts, the first and most obvious being that they are China’s only legal tender silver coinage. It should also be considered that there are 1.35 billion Chinese and the current mintage limit of one-ounce Silver Panda coins is set at 8 million pieces per year, while the United States has a population of 320 million and is currently minting over 40 million American Silver Eagles per year. Secondly, the legislation that allowed free market pricing of silver and that enabled Chinese citizens to invest and trade in the white metal has only been around for a little more than a decade, leaving further room for silver’s popularity in China to grow. The third reason concerns the distribution of Chinese Silver Pandas inside mainland China which has until recently been under direct state control, meaning that only government affiliated institutions could sell these coins, resulting in a highly ineffective and illiquid market. This has now changed and bullion dealers and financial institutions are able to facilitate the trade of these coins. Fourthly, the Chinese government is making a concerted effort to promote gold and silver ownership, something you will not see in western countries. Lastly, China has a history of strong affinity towards silver, and if the current policy of liberalisation of the precious metals market continues, this heritage could provide additional long-term support for Chinese Silver Panda coins.
China’s silver demand
The Chinese people have long appreciated silver as a store of wealth and a medium of exchange. Evidence tracing as far back as the Han dynasty (200 BC) shows that silver ingots were used as money, an established practice that persisted until 1936. In addition, from the year 1500 to 1800 China was the single largest importer of silver in the world. The reason for this large influx of silver was due to the substantial trade that was being conducted between Chinese and foreign traders. Foreigners had great interest in Chinese silk, tea and porcelain, while the Chinese on the other hand had an appetite for silver. China’s hunger for silver can be explained by the simple equation of demand and supply: China’s large population, coupled with its dynamic and commercially oriented economy, needed a medium of exchange, or money, but an inadequate domestic mine supply of gold and silver forced it to seek precious metals from abroad. Today, the equation has somewhat changed: advances in mining technology and geological exploration have made China the world’s third largest silver producer, but its affinity towards silver is as strong as ever with annual demand almost twice as much as domestic supply. As was the case some 200 hundred years ago, China is today a leading market for physical silver investments.
Chinese Silver Pandas marked the beginning of the country’s bullion market liberalisation
Contrary to most major western economies, China never used gold but rather silver as the primary anchor for its monetary system. The monetary system based on silver served the country for several centuries, but the onset of the Great Depression in conjunction with the rise of communism in the 1930s led the authorities to abandon it in favour of a pure paper standard. To support the new fiat system, legislation was introduced which stipulated that circulating monetary silver had to be turned over to the authorities in exchange for the new paper currency. In spite of the new harsh rules, commercial trade of silver and ownership of jewellery and antiques made out of silver was still allowed, albeit only for a short period. In the late 1930s, the outbreak of the Sino-Japanese War and the intensified rivalry between the Communist and Chinese establishment forced the authorities to proclaim a ban on silver ownership in any shape or form.
This ban would be in place for five long decades before the Chinese Government made an economic and philosophical turnaround regarding its domestic bullion market with the introduction of the Chinese Gold and Silver Panda coins in 1982 and 1983 respectively. From these years onwards, the Chinese authorities would slowly begin to loosen the restrictions that had been put in place since the 1930s. Unfortunately, the liberalisation of silver bullion has not progressed at the same pace as the gold market, and thus silver, unlike gold, still carriers a 17% Value Added Tax in China. Imagine, then, what would happen to the demand for Chinese Silver Pandas if this tax were removed!
The Chinese Panda Bear
The decision to use the iconic panda bear as the coin’s main motif has played a major part in the successful promotion of Chinese Silver Panda coins. The panda bear is an animal endemic to central China and is characterised by the black patches around its eyes and ears. In spite of its charming and peaceful nature and its status as a Chinese national symbol, panda bears are unfortunately very rare animal. Due to deforestation and commercial farming, large parts of the panda bears’ natural habitat have been destroyed and thus the population of pandas living in the wild has dwindled by some estimates to only 2000 individuals. In the past decade, extensive conservation efforts have been made by the Chinese Government to stem the declining panda bear population. Although still an endangered species, the conservation efforts are believed to be working as scientific surveys show that the population of wild pandas has started to recover.
The Chinese Gold Panda was first introduced in 1982 and Silver Panda in 1983, both have since been in continuous production, with the exception of 1986 when no silver Pandas were issued. Chinese Panda coins have been manufactured at three different locations:
*Shanghai Mint 1982-2004
*Shenyang Mint 1985-1999, 2003-2004
*Shenzhen Guobao Mint 1999-2002, 2005 onwards
The Shenzhen Guabao Mint is a subsidiary of the People’s Bank of China (China’s Central Bank).