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China has just issued draft regulations to control the production of solar cells.
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This shows that Beijing is aware of and is concerned about industrial overcapacity.
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China and the West are involved in a trade dispute over excess capacity, which Beijing has rejected.
China and the West are at loggerheads over allegations that the East Asian giant is producing a lot of things and depressing global prices.
China retreated against this notion, saying that the West is trying to contain its economic growth.
But Beijing recently released a new set of rules that show China is also aware of and concerned about excess capacity – specifically in solar cell production.
On Tuesday, China’s industry ministry released new 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 excess capacity, but said in its proposal that it aims to guide solar cell companies to reduce production projects that “simply expand production capacity” while improving innovation, production, quality and reducing production costs.
China’s Ministry of Industry intends to increase the proportion of capital that shareholders must invest in projects. This could limit the speed of industry expansion and reduce overproduction.
The new rules come as the solar industry grapples with a glut of panels after years of breakneck growth. The sector is a fundamental pillar of the country’s economy “new three” economic engines, so Beijing would like it to be sustainable.
China is producing more solar panels than the world can absorb
As it is, China is producing much more solar panels than your electrical grid can support. There is such an abundance of solar panels around the world that some people are using them as garden fence.
China’s solar module manufacturing capacity nearly tripled in 2022 alone, before gaining another 84% in 2023, commodities consultancy Wood Mackenzie wrote in a report in April.
Ed Crooks, vice president of energy at Wood Mackenzie, called the increase “the most dramatic.”
Last year, China – the world’s largest producer of solar energy – installed fewer panels than it produced, according to Wood Mackenzie.
Oversupply has caused a drop in solar cell prices that even Chinese manufacturers are outraged about.
In May, the China Photovoltaic Industry Association called for more mergers and acquisitions as well as restrictions on domestic competition to control capacity.
On Monday, Longi, a major Chinese solar power manufacturer, said in a filing of shares 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 industry does not have the capacity to withstand further price drops in the short term,” Longi said on Monday.
Read the original article at Business Insider
