U.S. Solar Industry Points to Evidence of Chinese Government's Escalating Intervention in World Renewable-Energy Markets

Chinese Government's New Domestic Subsidy Program and Rescue Plans for Troubled Producers Perpetuate Distortions of World Solar Market, U.S. Group Says

WASHINGTON, D.C., Nov. 1, 2012 – Chinese solar manufacturers have suffered tremendous business losses as a result of massive over-production, billions of dollars of Chinese government subsidies and dumped export pricing, according to the Coalition for American Solar Manufacturing (CASM). Now that Chinese producers face potential import duties to counter their illegal trade practices in the United States and Europe, CASM said, the Chinese government this week has revealed plans to invest more than $11 billion to create a domestic solar market to further buoy its manufacturers and their export drive.

The massive new intervention, combined with recent Chinese government decisions to take new direct and indirect ownership stakes in at least one top Chinese producer to prop up its foundering operations, demonstrates the Chinese government's resolve to perpetuate damaging distortions in the world solar-technology market at any cost, CASM said. Left to contend with unfettered forces of supply and demand, the group said, many Chinese companies would be forced to curtail or close operations and lay off workers, just as more than two-dozen U.S. solar producers have had to do.

"China's green mercantilism strategy is to run out the clock," Matthew Stepp and Clifton Yen of the Information Technology and Innovation Foundation wrote in a recent article posted on Forbes' website. "China knows it just needs to dial up the subsidies for only a little while longer until American producers give up or go bankrupt. Once it knocks out foreign producers, Chinese solar manufacturers will dominate global production and can increase their prices."

SolarWorld, the largest manufacturer in the Western Hemisphere and leader of CASM, concurred. "We have no doubt – none – about our ability to compete with Chinese producers on fair footing," said Gordon Brinser, president of SolarWorld Industries America Inc., based in Oregon. "But we have said all along that U.S. solar manufacturers cannot compete with the Chinese government and, as a matter of basic trade law, should not be confronted with doing so. The Chinese government is now acting to further prop up its failing industry, adding insult to injury abroad. This ongoing government intrusion in the U.S. market is materially injuring advanced producers who are employing Americans."

On Oct. 19, 2011, CASM backed SolarWorld in filing anti-subsidy and anti-dumping cases with the U.S. government against the Chinese solar-manufacturing industry. The U.S. International Trade Commission (ITC) votes Wednesday whether Chinese practices have harmed the U.S. industry. An affirmative vote would validate the ITC's preliminary, unanimous determination of Dec. 2, 2011, as well as activate import duties ranging upwards from about 24 percent that the U.S. Department of Commerce has recommended against Chinese imports of crystalline silicon solar technology. CASM, representing more than 225 U.S. employers of more than 18,000 American workers, contends that the Chinese industry enjoys no inherent cost advantage but rather a buffet of subsidies for its export drive. SolarWorld is participating in similar trade cases filed by a European domestic industry coalition.

The latest Chinese program – announced Oct. 27 in the People's Daily,a publication of the Community Party of China's Central Committee – will invest $11.2 billion in incentives to spur domestic solar adoption to create a new market for Chinese companies. CASM says many of these companies, which previously exported 90 to 95 percent of production, would have gone bankrupt if they had operated in open, free market economies. Moreover, analysts note that China has insulated its solar market from foreign competition through tariffs and, more recently, non-tariff barriers, while Chinese exporters have enjoyed wide-open access to the U.S. market, including sales onto military bases.

The new program calls for efforts to reduce the cost of supplying solar energy to national networks, according to the published reports. The People's Daily article notes that the cost of bringing solar energy to the grid is at least twice as much as China's mainstay energy source – inexpensive, dirty coal – and that while the Chinese industry has 50 gigawatts (GW) of solar-manufacturing capacity, total world demand is only 30 GW a year and Chinese demand is only between 2 and 3 GW.

The article quotes Liu Zhibo, vice president of Suntech, a financially embattled Chinese producer and the world's largest solar manufacturer, as saying the Chinese industry increased production by 100 percent in 2011 while global demand rose by just 50 percent. CASM said the resulting overcapacity led to a collapse in pricing, which has caused many Chinese companies, including Suntech and LDK Solar, to lose hundreds of millions of dollars and look to national and provincial governments for yet more help.

Meantime, CASM said, LDK will keep producing and exporting, thanks to two government bailouts in three months. In July, the province of Xinyu paid off $80 million in LDK's debt, according to published reports. Now, the company has sold a 20 percent ownership position to Heng Rui Energy, a Chinese government-controlled entity, for $23 million, according to a report by Bloomberg News.

Suntech, according to reports cited by Greentech Media, has talked with the Chinese government about its purchase of $541 million in Suntech debt due next spring. In addition, after the company received a delisting notice from the New York Stock Exchange, a Bloomberg report citing Chinese sources reported that the company had received a new, $32 million loan from the state-owned Bank of China. Bloomberg also noted Suntech's headquarters city of Wuxi has set up a task force to help ensure other government-owned banks "optimize credit support and provide financial services to Suntech."

Founded by seven companies that manufacture solar cells and panels in the United States, CASM now includes more than 225 employers of more than 18,000 Americans. The founding manufacturers have plants in nearly every region in the United States. For details about CASM, go to www.americansolarmanufacturing.org; email media questions to media@americansolarmanufacturing.org; other questions or comments may be emailed to contact@americansolarmanufacturing.org.

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