China has become the world's biggest silver market, according to an industry report, both as a physical investment and in paper trading of silver futures and other similar products.

The Washington-based Silver Institute said total silver demand in China increased by more than 100 million ounces, or Moz, in the past 10 years, to a record of 170.7 Moz in 2011.

China has been liberalizing its silver market since the start of 2000, creating more investment channels for buyers and sellers of silver.

In 2009, the country started offering investors the chance to buy silver bullion bars, and within two years the net demand for silver bars and coins soared to 17 million Moz, equivalent to some $600 million, making up 8 percent of global net purchases, said the report, compiled by Thomson Reuters GFMS.

In May this year, the Shanghai Futures Exchange began trading silver contracts with a standard trading unit of 15 kilograms and a daily price limit of 5 percent of either side of the previous day's settlement price.

Its goal was to provide Chinese market participants with direct market access, and give them the capability of hedging domestically. Regulators also expressed hopes the silver futures contracts would ease price volatility and provide a pricing mechanism.

According to the report, the first five months' trading saw total volumes of 17.436 Moz through to the end of November.

With an average daily turnover of 123.7 Moz, the Shanghai exchange has already become an important commodity exchange for global silver futures trading, second only to Comex in New York.

The report added that an increasing number of commercial banks are now offering silver brokerage services to clients, and many wealth management service providers are including silver in client portfolios.

"Compared to gold, silver presents more volatility and is a more leveraged choice," said Chen Bin, a wealth manger with Shanghai Pudong Development Bank.

China's share of global silver supply stood at 14 percent at the end of 2011, tripling from 94.2 Moz in 2002 to 281.5 Moz in 2011, according to the report.

Its share with global silver demand had hit 17 percent by the end of 2011, rising from 67.1 Moz in 2002 to 170.7 Moz, a 154 percent increase, the report said.

It added that driven by the country's manufacturing sector and heavy investment in infrastructure, fabrication demand for silver in China has increased by more than 82.4 Moz in the past decade to 159.5 Moz.

During the same period, industrial silver fabrication in China has experienced an almost uninterrupted period of growth, posting a 135 percent increase.

The electrical and electronics sector, driven by its semi-conductor industry, contributed the largest share of the country's industrial silver demand, rising from 17.1 Moz in 2002 to 40 Moz in 2011.

During that year, industrial applications accounted for 56 percent of the total fabrication demand across the country, which was 159.5 Moz, mainly from cell phone and computer production.

A strong demand for silver also came from makers of personal electronics goods, including tablet computers and light emitting diode backlit televisions.

wuyiyao@chinadaily.com.cn