A recent order by the Chinese Ministry of Industry and Information Technology has sounded the death knell for about 75% of the country’s solar panel and related component manufacturers. The ministry has released a list of 134 companies which will be eligible to receive credit support from financial institutions.
The companies which failed to be recognised by the ministry as being eligible for state support will not be able to request refunds of export tariffs and neither will these companies be able to participate in local deals to supply components to set-up power plants.
This ‘cleaning up’ of the Chinese solar equipment manufacturing sector may trigger massive consolidation as the unsupported companies could look to larger companies for absorption. Consolidation may actually bring good results for the Chinese solar components manufacturing sector.
Consolidation would help reduce the excessive competition in the sector and would thus help improve revenue in the long run. And since the ministry would review this list of eligible companies every 6 to 12 months, the companies would try to remain on top of their game to ensure long-term survival in the local as well as the international market.
The Chinese companies have been facing the double whammy of falling revenues (owing to the falling module sale prices) and threat of anti-dumping duties from the United States, Europe, and even India. Add to that the global economic slowdown and strain in the carbon markets around the world.
Partially in order to beat the external factors, the Chinese government has increased its solar power capacity addition target from 5 GW to 40 GW for 2015. The clean-up and potential consolidation may actually help the government to concentrate on regulating the solar power market and achieve the target.
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