Trade Disputes Affecting Chinese Solar Export Markets

China’s banks, under Beijing’s directive, have over-financed the solar sector, resulting in factory capacities that far exceed global demand. This overcapacity has created significant tension within the industry. To cut costs, solar manufacturers across China have laid off thousands of workers. Some major companies have even implemented drastic measures such as yearlong unpaid vacations or 30 percent pay cuts for remaining employees. The rapid decline of local subsidies has compounded the problems for China’s solar energy companies. Local governments, facing a housing crisis, are struggling to generate revenue from long-term land leases to real estate developers, which were previously a major source of funding. China’s leadership is increasingly concerned. The Ministry of Industry and Information Technology recently proposed a rule limiting solar companies to borrowing only 70 percent of the funds needed for factory construction or expansion, down from the previous 80 percent. However, this adjustment is insufficient to address the issue of overcapacity. Meanwhile, the West is raising barriers against Chinese solar panels. Europe has started excluding them from government procurement projects unless Chinese companies disclose their subsidies, which they refuse to do. In the U.S., concerns over Chinese subsidies prompted President Biden to reinstate steep tariffs on solar products imported from Southeast Asia that contain significant Chinese components. Additionally, the Department of Commerce has initiated trade cases against imported solar panels, potentially leading to further tariffs.

More solar manufacturing could be coming to Indonesia as a result. Trina Solar (in partnership with PLN, Sinar Mas and Agra Surya Energi) already has a solar manufacturing plant being built at Kendal Industrial Park in Java (https://lnkd.in/gtxU-jVV). Trying to crack down on companies that are allegedly skirting US import tariffs is a constant cat and mouse game. If you're wondering how these tariffs square with the WTO rules on MFN status that the US is supposed to abide by....well, you can read what the USTR says: "In early 2018, the United States imposed the solar safeguard measure to support the domestic solar industry’s efforts to adjust to import competition primarily attributable to excess solar cell and module capacity by Chinese producers in China and around the world and exacerbated by China’s non-market practices. The safeguard was established after the U.S. International Trade Commission (USITC) found that the domestic solar industry was being seriously injured by increased imports. The safeguard imposes a tariff-rate quota on imports of cells and a tariff on modules over a four-year period currently set to expire on February 6, 2022. In July 2019, China requested the establishment of a WTO panel alleging that the U.S. imposition of the safeguard was inconsistent with various obligations under the General Agreement on Tariffs and Trade 1994 and the WTO Agreement on Safeguards. The Panel rejected all of China’s claims." https://lnkd.in/gtbie5Yk "The future of Southeast Asia’s booming solar industry, which produces the most panels in the world after China, is being thrown into doubt as the US looks set to impose hefty tariffs on the region. Chinese firms that set up factories there over the last decade are now being accused of skirting US import levies on their home market. At least three - including Longi Green Energy Technology Co. and Trina Solar Co. - have scaled back operations in Thailand, Vietnam and Malaysia, which, along with Cambodia, are being targeted by Washington. The four countries account for more than 40% of solar module production capacity outside of China, according to BloombergNEF, and other Chinese firms with facilities there are hunting for markets to replace the US." "The mood of the suppliers is to pack the lines, especially the cell lines, and move them to either Indonesia, Laos or the Middle East,” said Yana Hryshko, the head of global solar supply chain research at Wood Mackenzie Ltd. Some Chinese manufacturers are waiting to see what the tariff level will be before deciding if they need to relocate, she said." https://lnkd.in/gMqXJNsG

Donald Trump's renewed tariff row with China is set to worsen a key problem confronting the world's No. 2 economy: a glut of cheap goods for which companies are struggling to find enough buyers. From makers of steel rebar to furniture and solar panels, more Chinese manufacturers have slipped into the red after slashing prices to compete for market share. As of the third quarter of 2024, more than 23% of China's publicly traded companies were loss-making, compared with 20% in 2023 and less than 10% in 2019, before COVID-19 struck, according to a Nikkei Asia analysis based on data from Wind Information. Now, economists warn that Trump's extra blanket tariffs of 10% or more on over $400 billion worth of Chinese exports risk pushing more manufacturers over the brink or accelerating the relocation of production out of China. This threatens to inflict more pain on an already fragile job market and exacerbate the country's deflationary pressures. "Relocating products to third countries can shield Chinese manufacturers from the shock of tariffs," said Chen Zhiwu, a finance professor at the University of Hong Kong, "but it's not so positive for the Chinese economy since they are taking away job opportunities." One of China's largest solar companies, Tongwei, warned investors that it expects to report a loss of up to 7.5 billion yuan for last year, citing a "sharp decline in prices across all parts of the photovoltaic industry chain." China's three solar majors -- Longi Green Energy Technology and TCL Zhonghuan Renewable Energy Technology are the other two -- reported an estimated combined loss of 24 billion yuan for 2024, versus a combined profit of 27.8 billion yuan for 2023. Manufacturers that rely excessively on the U.S. market are, naturally, the most vulnerable to the Trump tariffs. Shanghai-based mattress producer Healthcare told investors last week that it expects to report up to 160 million yuan in losses for 2024. Weak domestic demand and major expenditures on marketing squeezed its profitability, said the company, which counted on North America for nearly half of its revenue in the first three quarters of 2024. ROIDMI Information Technology, a Wuxi-based maker of vacuum cleaners backed by smartphone maker Xiaomi, last month went out of business due to a "change in market environment and operational adjustment," according to a statement on its website. The company had gained nearly 600 million yuan in revenue in 2022, with overseas sales accounting for a large share. Read the full article: https://lnkd.in/erSHY6-c #China #economy #tariff #US #Trump #tradewar #overcapacity #exports

The environment for solar wafer manufacturing outside of the Chinese supply chain continues to improve. The incoming Administration is likely to have a focus on domestic content, and may strengthen the tax benefits for using solar panels with high levels of DC, and Customs and Border Protection continues to crack down on imports of solar products linked to forced labor. They have just added four Chinese wafer producers to the "entities list" under the UFLPA, meaning that these wafers and cells and modules made from them are presumptively barred from entering the US. This includes JA Solar, a major wafer producer. Several companies are making good progress on wafer capacity in the US; Corning Incorporated/Hemlock Semiconductor, NorSun and Qcells North America. NexWafe also continues to make great progress on their high throughput, low carbon wafer technology. All of these producers will make low carbon footprint wafers free of forced labor risks. Domestic cell and module producers should be preparing for reduced cell and wafer supplies from China, and mow is the time to be seeking arrangements for non-Chinese supply. https://lnkd.in/gbtuN526

Chinese solar panels are at the forefront of the country’s domination of clean technology. Manufacturing capacity to produce the lowest-cost panels in th world has reached astounding levels, for better or worse. The worse part is the tidal wave of panels threatening to overwhelm any attempt to make panels elsewhere on the planet — a major problem for the countries that want to manufacture at least some panels at home to generate jobs and assure secure supplies. That’s why so many of these countries — from India across Europe to the U.S. — have slapped tariffs on Chinese-made panels. But Chinese companies haven’t given up on overseas markets, indeed they see little choice but double down on them given how much production capacity they find themselves drowning in. And that, in a sense, is the better part. Chinese companies, who benefit from decades of government subsidies, will compete on a playing field levelized by tariffs. That means consumers in the richer countries will pay more. But some Chinese companies are also setting up factories in these markets, or in third countries from which they can export without tariffs. That helps create jobs in those places. Chinese companies are also taking the hit, continuing to offer their panels in the U.S. and, particularly Europe. Finally, we can hope product they aren’t able to sell into wealthy countries find their way, directly from China or indirectly, to developing countries that aren’t putting up barriers and are in desperate need of the lowest-cost panels they can find. In the end, the broadest measure of success is if China and world find ways to utilize the stupendous production capacity and skillbase of China’s solar industry, without overwhelming solar manufacturing elsewhere or forcing the wholesale closure of Chinese factories making just what the world needs right now. Xiaoying You, in her first story for Cipher News, looks at how Chinese solar companies are approaching these challenges. https://lnkd.in/eythzjH2