China Rules Solar Energy, but Its Industry at Home Is in Trouble

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 percent 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 percent 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 has shown a high tolerance for letting firms stumble and even fail in large numbers.

Something similar is happening in the automotive sector. Annual car sales in China are around 25 million a year, more than any other country but barely half the country’s ability to make vehicles. So automakers in China are now following the solar industry’s lead in cutting prices sharply and ramping up exports.