Despite tariffs, China pushes photovoltaic manufacturing

Despite tariffs, China pushes photovoltaic manufacturing

Despite the new U.S. anti-dumping and anti-subsidy tariffs on their solar products, Chinese photovoltaic (PV) manufacturers enjoy an enormous domestic market supported by government policies. Meanwhile, Beijing’s industrial upgrading agenda for the domestic solar industry is likely to strengthen China’s bargaining power in international trade negotiations.

This time around, Chinese PV manufacturers are prepared as the U.S. Department of Commerce and International Trade Commission have decided to impose anti-dumping duties of 26.71 to 78.42% and anti-subsidy duties of 27.64 to 49.79% on solar panels made in China.

According to, Chinese solar manufacturers have been hedging the risks of high tariffs in developed countries by expanding business in emerging economies, opening overseas factories, and investing in downstream PV power plants. More importantly, the soaring demand from developing countries (especially the Chinese market) enables these solar manufacturers to minimize loss from the U.S. tariff increase.

Global and Chinese PV market outlook in 2015

In recent years, China has become one of the world’s largest solar markets. According to the energy research by IHS, global PV demand will grow by 25% in 2015, reaching 53–57 gigawatts (GW) of total installed capacity. China, together with Japan and the U.S., will be the largest market in 2015. China will also have the highest absolute market growth along with the U.S. and India.

The Chinese government is developing solar energy to cope with air pollution from burning fossil fuels.

According to the preliminary data from the China National Energy Administration (NEA), China installed a total of 10.60 GW solar power capacity in 2014 (a quarter of total world installed capacity), including 8.55 GW in Concentrated PV (CPV) and 2.05 GW in Distributed PV (DPV). Compared to Beijing’s initial plan in early 2014, the goal to install 8GW of CPV was met, while the DPV installation fell 4 GW shy.

NEA aimed to add 15 GW installed solar power to the national grid in 2015, with 8 GW in CPV and 7 GW in DPV. Although the DPV installation in China failed to meet the goal in 2014, it will grow faster with the help from policy support and new business models. IHS Inc. forecasts that at least 4.7 GW (out of the planned 7 GW) of DPV will be installed, an increase of 20% from 2014.

Beijing releases energy efficiency “front-runner” policy

Apart from an ambitious downstream installation plan, Beijing is also stepping up efforts to impose a higher energy efficiency standard on upstream PV production. In January 2015, the National Development and Reform Committee (NDRC) issued Embodiment of Energy Efficiency “Front-runner” System to promote energy efficiency in products, private entities, and public institutions.

The NEA followed with a drafted “front-runner” system for domestic solar makers: companies recognized as industrial leaders will receive government support in research and development, marketing, and sales. NEA further requires that all public funded projects follow the “front-runner” standard in procurement, locking in enormous demand for manufacturers with lower energy consumption.

The forerunner policy is clearly in line with the Chinese government’s agenda to upgrade the domestic PV industry. The energy efficiency standard set for the industrial pioneers lies between the current standard and the upgraded energy efficiency standard drafted by the Ministry of Industry and Information Technology (MIIT) in January 2015. Therefore, NEA’s forerunner system might serve as a transition policy toward a higher industrial standard.

Behind the scenes, the above policies reflected Beijing’s changing focus on greener development instead of pure GDP growth. As China declares war against air pollution, among other environmental issues, industrial upgrading and massive investment in solar energy is becoming one of the top priorities on the country’s development agenda.

Shifting tides in global PV market

The growing solar market is granting China stronger bargaining power in international trade disputes. For instance, China imported 102,177 tons of polysilicon (a key commodity for PV production) in 2014, reaching a year-over-year increase of 26.7%.

Growing more important in the global solar energy supply chain, China imposed anti-dumping tariffs against polysilicon imports from the U.S. and South Korea in 2013. This action was widely believed to be a direct response to the U.S. anti-dumping tariff on Chinese solar products in 2012.

Meanwhile, observers should also pay attention to Chinese local governments. With relatively higher autonomy in economic decisions, these local governments played a crucial role in the first half year of 2014 by helping imports from the U.S. and South Korea to bypass the high tariff through a trade “loophole” under the processing trade rules.

Often tied more closely with local PV manufacturers, these governments have strong incentives to reduce the import costs for local enterprises, thus going different ways from the central government.

Categories: Asia Pacific, Economics

About Author

Elvin Chuanye Ouyang

Elvin is a seasoned political risk expert, with expertise on China and the Asia Pacific. He has worked for numerous global risk consultancy groups. He received his BA in International Politics from Fudan University in China, focusing on International Political Economy.