China requests opinions on stricter regulations to reduce solar overcapacity.

By Oliver Townsend Jul 10, 2024
China solicits views on tighter rules seeking to curb solar sector overcapacity.jpegOrginal image from: https://www.scmp.com/business/article/3269914/china-solicits-views-tighter-rules-drafted-curb-solar-sector-overcapacity

China’s Ministry of Industry and Information Technology has recently introduced new rules to regulate the solar industry in the country. These rules aim to address the challenges faced by the sector due to overcapacity, which has led to a decline in global prices. The draft rules include provisions for minimum capital ratios for new and expansion projects, as well as requirements for investment in research and development.

Regulating Solar Industry Expansion

The Ministry of Industry and Information Technology is seeking public feedback on the proposed rules, which stipulate a minimum capital ratio of 30% for new and expansion projects in the solar industry. This marks an increase from the previous requirement of 20% for projects producing wafer, cell, and modules. The draft regulations also mandate a minimum investment of 10 million yuan or 3% of total sales in research and development activities.

Promoting High-Quality Development

The primary objective of these rules is to enhance the management of the photovoltaic industry and encourage innovation and quality improvement. By setting standards for capital investment and research and development spending, the government aims to promote the high-quality development of the solar industry in China. The rules are designed to guide the industry towards upgrading and structural adjustment to ensure sustainability.

Addressing Global Supply-Demand Mismatch

Chinese solar manufacturers, who dominate the global supply chain, have been facing challenges due to excess production capacity. This has led to a mismatch between supply and demand, resulting in significant losses for manufacturers. The new rules are intended to address this issue by discouraging excessive expansion and promoting technological innovation and cost reduction.

Rallying Industry Support

Following the announcement of the draft rules, major Chinese solar manufacturers experienced a surge in share prices, indicating industry support for the proposed regulations. Despite some companies reporting anticipated losses in the first half of the year, investors are optimistic about the long-term benefits of the rules in stabilizing the market and promoting healthy competition.

Guiding Industry Progress

Industry analysts believe that the new regulations will help steer the solar industry in China towards sustainable growth and profitability. By encouraging companies to focus on innovation and quality rather than expansion for the sake of production capacity, the rules aim to create a more stable and competitive market environment. This guidance from policymakers is expected to lead to a more robust and resilient solar industry in the future.

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