Will China finally impose some order in its Solar Manufacturing Industry?

China’s solar industry is in total chaos with massive overcapacity plaguing the industry for the last two years. Two of the biggest solar companies LDK and Suntech have already defaulted on their debt, while hundreds of others keep churning out huge losses. Foreign governments are incensed with China’s behavior, with US already imposing anti-dumping duties on Chinese solar panel imports and India + Europe planning to do so in the near future. The Chinese government has tried to bring some rationality to the industry but without much success.

Local governments have kept on bailing out these zombie companies repeatedly despite the central government. Even the Chinese Development Bank (CDB) has made massive loans to bankrupt solar companies. LDK received a $80 million loan from CDB despite defaulting on a paltry $23 million convertible debt. According to a government source, the Chiense government will impose stricter lending and environmental regulations against small companies. It will force out companies which do not have a viable size thus letting the bigger companies win out. However, these pronouncements have been made a number of times before, without any results. The strange capitalism that exists in China has led to a price crash in a number of industries like wind turbines, steel, ship building and solar.

Read on GWI China Solar Booming.

Businessweek

China is expected in the first half to establish the minimum requirements solar-component makers must meet in order to be exempt from stricter government control, the China Securities Journal reported.The move is part of an effort to accelerate consolidation in the industry by weeding out weaker companies, the Journal said, citing people it didn’t identify. The requirements will provide benchmarks to evaluate various strengths and weaknesses of companies in the solar industry, according to the report.China will set environmental protection standards by capping the amount of electricity consumed and waste liquid and gas emissions during production processes, the newspaper said. Investment in research and development must account for 4 percent of revenues for companies with sales of 50 million yuan ($8 million) to 200 million yuan and 6 percent for those with sales below 50 million yuan, the Securities Journal said.