China announces major shift in support for solar energy companiesJanuary 9, 2014
China continues to reform solar industry
The Chinese Ministry of Industry and Information Technology has issued an order that could put 75% of the country’s solar products manufacturers out of work. The agency recently released a list of 134 manufacturing companies that are eligible for financial support from the government and its financial service institutions. This initiative is part of an overarching effort from the Chinese government concerning major changes being made to the country’s domestic solar industry.
Trade disputes spark change
China has been working on reforms for its domestic solar sector in the wake of trade disputes with some European countries. The disputes had highlighted the enormous amount of government financial support that some manufacturers were receiving. The Chinese government had also been supporting companies that were not making any standalone profits, preventing them from going out of business for the sake of exporting solar products. China has resolved its trade disputes and has already made significant changes to its policies concerning solar energy.
Companies may fail without government support
The companies that are not listed as eligible for financial support will likely go out of business or be acquired by larger, more lucrative organizations. Without government support, manufacturers are unlikely to be able to effectively manage the costs associated with exporting solar products to other parts of the world, especially as some markets impose high duties on Chinese products.
Excessive competition may be hurting domestic industry
The initiative is expected to help remove excessive competition in the Chinese solar sector. Excessive competition is contributing to some of the domestic solar industry’s problems. Few companies are providing innovative services or producing high quality products and unnecessary competition is making it difficult for companies to establish a strong presence in the foreign market. As larger companies acquire their smaller counterparts, competition is expected to improve, providing companies with new opportunities and making them more recognizable.