China is strategically positioning itself to become an even more dominant force in the global precious metals and critical industrial materials sectors by 2027. The country has laid out ambitious targets, including increasing its gold resources by 5% to 10% and boosting gold and silver production by over 5% within the next three years. This initiative is a clear reflection of China's focus on bolstering its resource security and industrial capabilities amidst a landscape of rising global demand and economic volatility.
Beyond precious metals, China is also committed to strengthening its aluminum industry through a comprehensive action plan spanning 2025-2027. Key objectives include a 3-5% increase in domestic bauxite reserves, an ambitious expansion of recycled aluminum production to exceed 15 million tonnes, and a significant shift towards cleaner energy sources, aiming for over 30% of primary aluminum power consumption to come from clean energy. This multi-pronged strategy underscores China's dedication to resource self-sufficiency, green transformation, and innovation in low-carbon smelting technologies.
These efforts are intrinsically linked to China's broader objectives of enhancing resource security and fostering industrial development. A notable aspect of this strategy is the consistent increase in China's gold reserves, with the People's Bank of China reportedly adding close to 1 million ounces of gold over the past six months as of April 2025. This steady accumulation highlights strong domestic and central bank demand for gold, particularly as a hedge against global economic uncertainties.
How China's Increased Precious Metals Output Will Impact Global Markets by 2027
The projected surge in China's precious metals output, especially the targeted 5-10% rise in gold resources and over 5% increase in gold and silver production, is anticipated to have profound effects on global markets.
Impact on Global Gold Markets: China's expanding gold production and consumption are expected to significantly influence global gold prices and supply chains, potentially shifting the balance of power. The strategic gold buying mandates, notably by Chinese insurance companies, are generating new institutional demand, effectively removing substantial quantities of gold from the available supply. This contributes to a tighter market and upward pressure on prices. This structural shift in demand is seen as supportive of sustained higher gold price levels, with some major investment banks revising their gold price targets significantly upward (e.g., Goldman Sachs projecting $4,500 per ounce in 2025). Furthermore, sharply rising physical gold premiums in China indicate robust regional demand and potential physical supply tightness, which could introduce global volatility and price increases. The inherent challenges in rapidly expanding gold mining supply, due to long development timelines and escalating production costs, may further exacerbate supply-demand imbalances.
Broader Market Effects: China's increasing control over precious metals supply chains could escalate geopolitical and trade tensions, echoing previous concerns in sectors like aluminum and rare earth metals. This could consequently affect global industrial supply chains and pricing. As China solidifies its position in precious metals output, Western markets may encounter heightened competition for physical metal, potentially leading to higher premiums and supply constraints. In essence, by 2027, China's increased precious metals output and strategic demand are expected to tighten global supply, drive up prices, and fundamentally alter market dynamics, solidifying China's pivotal role in these markets and creating widespread ripple effects across global commodities and financial sectors.
How China's Strategic Precious Metals Growth Could Shift Power in the Global Market
China’s deliberate growth in precious metals, particularly gold and rare earths, is set to significantly redefine global power dynamics through several strategic avenues:
- Undermining Dollar Dominance and Reshaping Reserve Currency Dynamics: China's extensive gold accumulation, exemplified by adding approximately 1,000 tonnes between 2013 and 2023 while simultaneously reducing its holdings of US Treasuries by 60%, is a calculated move to lessen its dependence on the US dollar.This dedollarization strategy aims to enhance China’s financial sovereignty by backing its reserves with physical gold, which is immune to external freezes or devaluations, thereby directly challenging the established dollar-centric global financial order.
- Enhancing Economic and Industrial Leverage: With a robust manufacturing base contributing about 25% to its GDP (compared to 12% in the US), China possesses a strong capacity to domestically process and refine precious metals. This vertical integration provides China with extensive control over the entire value chain—from extraction to refining to manufacturing—conferring significant leverage over global commodity markets and fortifying its economic resilience against external shocks.
- Monopoly and Control Over Critical Minerals and Rare Earths: China's near-monopoly in the global rare earth market, controlling approximately 90% of refining capacity and substantial mining operations, grants it unparalleled influence.This dominance enables China to dictate prices, impose export restrictions, and weaponize these resources for geopolitical ends.Recent examples, such as China’s rare earth export curbs, have already caused global supply disruptions, highlighting its ability to leverage resource control for political and economic influence.
- Strategic Use of Export Controls and Market Influence: China's strategy of operating at a loss to maintain low rare earth prices, coupled with stringent export controls, allows it to sustain market dominance and suppress potential competitors.This approach secures long-term control over critical materials vital for high-tech industries worldwide, significantly enhancing China's bargaining power in international trade and diplomacy.
- Shifting Global Price Discovery and Market Dynamics: China's increasing sway in gold markets is already impacting global price discovery. Growing domestic demand and the emergence of physical premiums in China are tightening global supply, challenging traditional Western dominance in commodity markets. This contributes to a more multipolar economic landscape, with China increasingly playing a central role in setting global commodity prices and influencing trade flows.
In summary, China’s strategic expansion in precious metals and critical minerals consolidates its economic and geopolitical power by actively reducing dollar dependency, asserting control over vital supply chains, employing targeted export policies, and reshaping global market dynamics. This multifaceted approach positions China as an increasingly dominant player, capable of influencing global commodity prices, trade flows, and geopolitical alignments by 2027.
