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PV Industry Future Hangs in the Balance

09-25 14:16 Caijing
The EU's lawsuit, which involves 21 billion euros of Chinese exports and puts 400,000 jobs at risk, may destroy China's PV industry, or become an opportunity for the industry to fix its distortions.

By staff reporters Shi Zhiliang, Wang Zhen, and Zhu Yue

The European Commission launched an anti-dumping investigation into photovoltaic (PV) modules and components (including solar cells and silicon chips) imported from China on Sept. 6, putting China's PV industry into a life-or-death crisis.

On Sept. 18, Liu Huijuan, director of the Legal Services Division of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, told Caijing: "The plaintiff (Germany-based SolarWorld and industry organization EU ProSun) also filed a countervailing duty trade remedy petition, and it is expected the European Commission will launch the countervailing investigation in late October."

The case is the most significant anti-dumping complaint the European Commission has received so far in terms of import value. It is also the biggest trade litigation China has ever encountered. According to EU estimates, China exported solar panels and related components worth about 21 billion euros to the EU in 2011, accounting for 70 percent of China's total output of photovoltaic manufacturing.

The U.S. Department of Commerce imposed heavy tariffs of at least 31.18 percent on Chinese PV companies in May this year, after an anti-dumping and countervailing investigation determined China had dumped solar products to the United States for less than the cost of manufacture. The EU is the biggest buyer of Chinese PV products, and if the 27-nation bloc decides to levy similar anti-dumping duties, many Chinese PV companies will be hit hard.

"We can only withstand a 10 percent tax rate," China Yingli Green Energy Holding Co., Ltd. (NYSE: YGE) Special Assistant to the President Chen Zhuo told Caijing. Yingli Green Energy is the largest manufacturer of photovoltaic products in terms of operating income, and its PV module shipments account for over 60 percent of Chinese PV module exports to the EU.

Chen Zhidong, international trade law professor at Fudan University's School of Law, said that based on past EU anti-dumping cases, with the exception of instances in which the plaintiff withdraws the complaint, EU investigations usually always result in punitive tariffs for Chinese enterprises. The only difference is the size of the tax rate. 

Along with explosive growth in the PV industry since 2005, China has become the world's largest solar panel producer, accounting for 80 percent of the EU market and 65 percent of the global market. Currently, there are thousands of PV manufacturing enterprises which employ about 400,000 personnel.

However, the industry has been in a state of abnormal development. Both the market for PV products and raw materials are abroad - 70 percent of Chinese PV products are exported to the EU; meanwhile, large quantities of silicon raw materials are imported from Europe. At the same time, booming PV module manufacturing hasn't brought a rapid expansion of China's PV power generation projects, as local governments tend to focus more on manufacturing that can create jobs and generate tax revenue instead of environmental protection projects.

Moreover, the production capacity of the PV industry in China is twice that of global demand, which has given rise to ongoing price wars between enterprises. Weaker foreign demand and price wars fueled by excess capacity have driven domestic PV companies into financial distress.

"When winter arrives, enterprises will have a difficult time. There are problems with capital flow on an industry-wide basis, and it all depends on who can weather the storm," said Miao Liansheng, Chairman of the Board of Yingli Green Energy.

In a bid to increase domestic demand, China's National Energy Administration released the 12th Five-Year Plan for Solar Power Development on Sept. 12. According to the plan, domestic market demand is expected to more than double compared to previous estimates.

Nonetheless, many already-beleaguered PV companies may not be able to wait until the domestic market develops.

Full article in Chinese: http://magazine.caijing.com.cn/2012-09-23/112145933.html

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