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Business Times
13 hours ago
- Business
- Business Times
China's overcapacity crackdown faces litmus test in solar sector
[BEIJING] China's efforts to curb industrial overcapacity face their first test in the indebted and bloated polysilicon sector, a key cog in solar cell production, where analysts say it is easiest for Beijing to intervene but still difficult to succeed. Under the plan, devised by industry players in the presence of Chinese regulators, big producers will pool 50 billion yuan (S$8.9 billion) to buy out the least efficient facilities and shut them down, then form a cartel to halt relentless price wars. Ideally, when prices rise, the loss-making producers will turn profitable and reimburse the debt incurred in the process. Reduced output and higher polysilicon costs would force solar panel makers – which can produce roughly twice as much annually as the world buys and have been a source of trade tensions between China and the West – to consolidate. But analysts see risks at every stage of this plan. First, it is unclear if the industry can agree who's in or who's out of the cartel. GCL Technology Holdings, one of the biggest producers, said earlier this month cartel planning was close to wrapping up but declined to provide details of the other participants. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Banks – whose incentive to finance this acquisition is to ensure that what they rate as a 'safe' sector doesn't turn to 'risky' – would likely be involved in the process, said Dan Wang, China director at Eurasia Group. Analysts warn local authorities, who have strived to fulfil Beijing's strategic green energy vision by handing out subsidies, tax breaks and cheap land to the sector, may not want the solar supply chains on their turf to shut. 'Which local government is going to let go of their industry first?' said Max Zenglein, senior economist for the Asia-Pacific at The Conference Board research group. 'They're going to be very cautious.' Finally, even if the cartel does form, any success creates the conditions for failure: after prices climb, members might be tempted to raise output and reap the profits. Reformers face all these risks despite the industry having fewer players and fewer supply chain inputs than most other sectors in the world's second-largest economy, where overcapacity is endemic and deflationary, and threatens trade relations and long-term growth. 'Success is hardly a foregone conclusion,' Gavekal Dragonomics analysts Tilly Zhang and Wei He said in a note. If the overcapacity crackdown 'fails to get traction in polysilicon, it will struggle in the many other industries' where the government has less capacity to foster swift changes, they said. GCL's peer Tongwei declined to comment. Polysilicon producers Daqo New Energy and TBEA did not respond to requests for comment. The solar and metals industry associations, the National Development and Reform Commission (NDRC)- China's state planner – and the Ministry of Industry and Information Technology also did not respond to requests for comment. Is everyone game? Over the past five years, the top four Chinese manufacturers alone built about two-thirds of the industry's capacity, which stood at 3.25 million tonnes at the end of 2024, according to Bernreuter Research, a consultancy. In 2025, Bernreuter anticipates an average utilisation of 35 per cent-40 per cent, down from 57 per cent last year. Morningstar estimates about 965,000 tonnes of polysilicon capacity was built or is still under construction this year, citing the China Photovoltaic Industry Association. Past attempts to get the solar industry to self-regulate have failed. Last October, the solar industry body proposed a price floor for solar modules, but the temptation for manufacturers to undercut competitors proved too enticing. The NDRC called for a ban on new production in an online meeting in February. Still, Karamay, a city in the northwestern region of Xinjiang announced a three billion yuan solar module manufacturing plant as recently as May, Chinese media reported. The Xinjiang energy regulator did not respond to phone calls from Reuters. A new 140,000-ton polysilicon manufacturing plant in Qinghai, a major provincial investor, also started test operations in March, according to a trade media report. The energy regulator for northwestern China, which includes Qinghai, did not respond to a faxed request for comment. Pain threshold In the event that the polysilicon cartel overcomes industry and local government opposition, it can raise prices to levels that the least competitive firms in the downstream solar panels sector cannot afford, forcing their exit, analysts say. 'Unless I see a lot of defaults all of a sudden really shrinking the size of the industry, I don't see how this is going to work,' said Alicia Garcia-Herrrero, Asia-Pacific chief economist at Natixis. She said that would test the Chinese leadership's tolerance for a bloodbath in an industry that it had championed as a national priority. The case for protecting strategic priorities also applies to other sectors, from electric vehicles and batteries to shipbuilding, all with supply chains much more complex than solar. 'It's very easy to build capacity to burn money, but then to scale it down and direct that in a healthy manner is much more difficult,' said The Conference Board's Zenglein. REUTERS
Al Etihad
09-05-2025
- Business
- Al Etihad
China's exports rise 8.1% in April despite escalating US tariffs
9 May 2025 09:51 BEIJING (dpa)China's exports rose more than expected in April despite escalating trade tensions with the United States, even as bilateral trade with Washington saw a steep increased by 8.1% year-on-year in dollar terms, the Chinese customs authority said on Friday. Imports dipped slightly by 0.2%, leaving a trade surplus of $96 billion for the figures came in well above market expectations. Economists had anticipated weaker export growth and a sharper drop in imports. In March, Chinese exports had already surged by 12.4%, which analysts attributed to stockpiling ahead of anticipated US with the US, however, plummeted following a wave of new tariffs introduced in April. US President Donald Trump imposed additional duties of up to 145% on Chinese goods, prompting Beijing to retaliate with its own tariffs of up to 125% on US sides, however, have issued exemptions for items seen as critical, such as certain electronics, to limit the economic a result, Chinese exports to the US fell by 21% in April from a year earlier, while imports from the US declined by 13.8%, according to official to Max Zenglein, chief economist at the Berlin-based Mercator Institute for China Studies, Beijing has been preparing for a potential escalation with the US in recent years. However, the renewed flare-up in trade tensions carries "massive risks" for the global economy, including Germany, he trade with Germany showed a sharp divergence in April, with exports jumping 20.4% year-on-year while imports dropped by 12.2%.Imports from the European Union as a whole fell by 16.5%.Zenglein noted that Beijing is using the current global disruptions to position itself as a more reliable economic partner, contrasting its approach with Washington's confrontational stance. Chinese President Xi Jinping has recently promoted closer cooperation during visits to countries including Russia, Vietnam and Malaysia.
