China rules solar energy, but its industry at home is in trouble

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By Keith Bradsher, New York TimesLast Updated: Jul 26, 2024, 09:56:00 AM IST

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Synopsis

China's solar energy market has seen rapid growth over the past 15 years, now dominating global production and exports.

iStock-1170098138 (1) — Chinese manufacturers are competing for customers by cutting prices far below their costs, and still keep building more factories.

China -- Over the past 15 years, China has come to dominate the global market for solar energy. Nearly every solar panel on the planet is made by a Chinese company. Even the equipment to manufacture solar panels is made almost entirely in China. The country's solar panel exports, measured by how much power they can produce, jumped another 10% in May over last year.

But China's solar panel domestic industry is in upheaval.

Wholesale prices plummeted by almost half last year and have fallen another 25% this year. Chinese manufacturers are competing for customers by cutting prices far below their costs, and still keep building more factories.

The price slashing has taken a severe toll on China's solar companies. Stock prices of its five biggest makers of panels and other equipment have halved in the past 12 months. Since late June, at least seven large Chinese manufacturers have warned that they will announce heavy losses for the first half of this year.

The turmoil in the solar energy sector amid enormous factory capacity and booming exports highlights how China's industrial policymaking works. The government decided 15 years ago to put extensive support behind solar power, and then let the companies claw it out.

Beijing's spare-no-expense policies are in particular focus as China doubles down on factory exports to compensate for a slowing domestic economy -- drawing criticism from the United States, the European Union and other trading partners who contend that China's heavy support of its industries is unfair.

Lavish lending from state-owned banks and generous local subsidies have produced manufacturing overcapacity. Solar companies cut costs and prices sharply to maintain market share. That led to a few low-cost survivors while many competitors were driven out of business in China and around the world.

China's banks have lent so much money to the sector for factory construction that the country's solar factory capacity is roughly double the entire world's demand.

"Enterprises continue to put advanced production capacity into operation to maintain competitiveness," Zhang Jianhua, director of China's National Energy Administration, said at a news conference last month. "At the same time, the outdated production capacity is still extensive and needs to be gradually phased out."

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