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China's solar sector bounces back

Industry consolidation and soaring demand have helped mainland panel makers to return to profitability after a painful slump

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As uncompetitive players went out of business or were consolidated, the number of solar panel makers on the mainland fell by 40 per cent to 205 between 2010 and last year. Photo: Reuters

Mainland solar panel and parts makers are seeing a resurgence in profitability after a round of industry consolidation weeded out high-cost players, while soaring domestic demand helped offset lower exports to Europe due to trade barriers.

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But looming trade restrictions from the United States may pose fresh challenges to producers seeking to maximise profits by boosting output in the notoriously cyclical industry.

"The solar industry is no longer in overcapacity. Supply of solar panels is lagging behind now," Liu Jie, party secretary of Xinyu city in Jiangxi province told reporters last week on the sidelines of a panel discussion during the National People's Congress parliamentary meeting.

Minister of Commerce Gao Hucheng told a press conference that the mainland's solar industry has been "reborn", largely thanks to policies designed to bolster domestic panel demand and partly due to efforts by Beijing and Brussels to reach a deal on preventing a fully fledged trade war last year.

Xinyu is the production base for LDK Solar, one of the nation's largest solar panel makers, which last month received from investors a seventh extension on a deadline for repayment of bond interest owed as it was close to implementing a debt restructuring programme.

The industry has matured considerably from the shake-out in 2012
Stefan de Haan, analyst

LDK was one of the large solar panel makers that suffered steep losses and experienced financial difficulties during the 2011-13 industry downturn.

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