A huge complex built outside Xinyu city in southeast China, was designed to hold 170 solar power companies, but now only five remain.
The Chinese government poured billions into making the country the world’s leading manufacturer of photovoltaic (PV) solar panels, yet all that is really left are empty offices, locked doors and vacant buildings.
Through the extensive use of subsidies, and $47.5 billion in credit, China tried to rapidly grow its solar industry into the dominating force in the global market, creating at least one PV panel manufacturing plant in half of the country’s 600 cities.
With massive government support the supply side of the industry quickly outpaced the demand side. Bloomberg write that if China’s factories were able to operate at full capacity, they would produce 49 gigawatts of PV panels a year, 61% more than was installed throughout the world last year.
Solar giants, such as LDK Solar and Suntech Power appeared, dependent on financial aid, and as supply outstripped demand the prices fell, leaving companies crippled with debt, and completely unprofitable.
Even though prices have started to rise again, they are still 60% lower than in November 2010, and many companies have filed for bankruptcy, including Suntech.
Angelo Sino, an analyst at S&P Capital IQ, stated that “there is definitely a slew of smaller zombie companies out there that are going to continue to fall one by one. You’ll see 10 to 12 names here when it all shakes out. The remaining names will either go bankrupt or be consolidated.”
After years of artificial expansion, nourished by government funds, China’s top 10 manufacturers now own $28.8 billion of liabilities, most to government institutions; but having said that China now produces 7 out of every 10 solar panels in the world, and eight of the top ten panel makers are Chinese.
With some difficulty China has managed to climb its way to the top of the global PV manufacturing market, but only now will it be clear if the plan worked and if any of the manufacturers can survive on their own in the post-subsidy apocalypse.
This piece is cross-posted from OilPrice.com with permission.