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China has just published draft regulations to curb solar cell production.
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This shows that Beijing is aware of industrial overcapacity and is concerned about it.
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China and the West are locked in a trade conflict over overcapacity, but Beijing has blocked the conflict.
China and the West disagree over claims that the East Asian giant producing too much stuff and global prices are falling.
China has withdrawn against this view, saying that the West is trying to contain economic growth.
But Beijing recently published a new set of draft rules showing that China also knows and is concerned about overcapacity, particularly in solar cell production.
On Tuesday, China’s Ministry of Industry published a new report draft regulation to promote “high-quality development” in the industry. The draft rules are open for public consultation until Monday.
The ministry did not explicitly target overcapacity, but indicated in its proposal that it aims to encourage solar companies to scale back production projects that “simply increase production capacity” while improving innovation, production and quality and reducing production costs.
China’s Ministry of Industry wants to increase the ratio of capital that shareholders must invest in projects, which could limit the speed of industrial expansion and curb overproduction.
The new rules come as the solar industry faces a glut of panels after years of dizzying growth. The sector is a key pillar of the “new three” economic drivers, so Beijing wants it to be sustainable.
China produces more solar panels than the world can absorb
As it stands now, China produces much more solar panels than the grid can handle. There is such a huge abundance of solar panels worldwide that some people use them as garden fence.
China’s solar panel production capacity is expected to nearly triple in 2022 alone, before growing another 84% in 2023, commodities consultancy Wood Mackenzie wrote in a report in April.
Ed Crooks, vice president of Wood Mackenzie’s energy division, called the increase “extremely dramatic.”
Last year, China, the world’s largest producer of solar energy, installed fewer panels than it produced, Wood Mackenzie said.
The oversupply has caused solar cell prices to drop, angering even Chinese manufacturers.
In May, the China Photovoltaic Industry Association called for more mergers and acquisitions and restrictions on domestic competition to control capacity.
On Monday, Longi, a major Chinese solar panel manufacturer, said in a share registration that 2024 will be a “difficult year” for the company and the industry. The company laid off thousands of workers earlier this year.
“The entire sector is unable to accept further price reductions in the short term,” Longi said on Monday.
Read the original article at Business insider
