Over the past 15 years, China has emerged as a powerhouse in the global solar energy market, dominating the production of solar panels worldwide. The country’s solar panel exports continue to rise, with a 10 percent increase in May compared to the previous year. However, despite its success on the international stage, China’s domestic solar industry is facing significant turmoil.
Wholesale prices for solar panels in China have plummeted, dropping by almost half last year and an additional 25 percent this year. This price war among Chinese manufacturers has led to fierce competition, with companies slashing prices below cost to attract customers while continuing to expand their production capacity.
The consequences of this price competition are severe, with the stock prices of China’s major solar companies halving over the past year. Several large manufacturers have also issued warnings of substantial losses for the first half of this year. This upheaval in the solar energy sector underscores the complexities of China’s industrial policy.
China made a strategic decision 15 years ago to heavily support the solar power sector, leading to a surge in manufacturing capacity. Beijing’s approach has been characterized by allowing companies to compete fiercely, even at the risk of failures and disruptions in the industry.
Similar dynamics are unfolding in China’s automotive sector, where oversupply is prompting automakers to follow the solar industry’s lead by cutting prices and increasing exports. Despite being the world’s largest automotive market, China’s vehicle production capacity exceeds its sales by a significant margin, prompting companies to seek overseas markets.
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 | Robots at a factory in China’s Xinjiang region in May. China produces most of the materials and components for the world’s solar panels, in addition to the panels themselves. |
