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China is firing back at dumping allegations from Europe, saying that government subsidies for solar panel manufacturers are only intended to boost domestic penetration of renewable energy. The dispute - which emerged from the acknowledgement of “lavish government support” for the industry from the CEO of China’s largest solar panel manufacturer - has grown in recent weeks and forced in impromptu meeting of Chinese government and industry stakeholders.
The controversy arose on 24 August when comments from Shi Zhengrong, head of Wuxi-based solar panel manufacturer Suntech, claiming that the company was selling their panels at a lower price than its marginal cost appeared in the New York Times.
Shi explained that in order to gain market share in the US, where ‘Buy American’ provisions are buoying local industry, his industry was taking advantage of strong government support to sell the panels for less than it cost to manufacture them. Such practices, known as ‘dumping’ in trade parlance, could be a violation of WTO trade rules.
German manufacturers call for tariffs
Shortly following the publication of the article, European solar manufacturers - led by the German firm Solarworld - called for a ‘Buy European’ provision in order to limit the sale of Chinese panels in Europe. Solarworld asked the German government and the EU to help discourage renewable energy investors from buying Chinese panels and cells that they say are unfairly priced.
According to a report by Swiss bank UBS, Chinese solar panel producers are undercutting their German competitors by some 20 percent. Solar panel manufacturers are calling on the EU to implement import tariffs on Chinese panels to protect the domestic industry.
Shortly following the public controversy, Shi contacted Times reporter Bradsher and recanted his comments. Shi insisted that he had misunderstood the question and that his company is, in fact, not selling panels below marginal cost.
But while Bradsher published Shi’s retraction, he points out that he asked the specific question twice during the interview and that the CEO “speaks fluent English and conducts interviews in that language.”
Beijing meeting denies dumping
Chinese government and industry leaders met in Beijing on 10 September to discuss the pricing issue. Sustainable energy business leaders were joined by the Energy Research Institute of the National Development and Reform Commission - a government agency that manages macroeconomic issues - as well as the Renewable Energy Industry Association in an effort to avert a potential ‘Buy European’ movement and demonstrate that Chinese solar panel exports are not, in fact, being dumped in US and EU markets.
Participants at the meeting argued that although the Chinese government has promised subsidies to encourage the renewable energy sector, none of the projects have been fully implemented yet. They said that regardless of this point, the subsidies are primarily meant to encourage the development of China’s own renewable energy sector, rather than to stimulate export oriented industries.
Many at the meeting argued that German companies are taking advantage of Shi’s statements to help support their industries that are experiencing difficulties for other reasons.
But Frank Asbeck, CEO of Solarworld - which produces solar panels in the US and Germany - argues that the 50 percent subsidies provision promised by the Chinese Ministry of Finance last month clearly demonstrates that direct subsidies are indeed going to Chinese solar companies.
China says financial crisis to blame
“A good part of European solar producers have experienced difficult times in recent months due to the financial crisis and many of them started purchasing cells from China and rebranding them with their own labels,” said Sean Tzou, Chief Operating Officer of Guangzhou-based TrinaSolar. ” Solarworld, one of the main firms accusing China practicing dumping measures, purchases a large portion of its equipment from China, so they must know if there is any dumping measure or not.”
Participants at the Beijing meeting said that several factors - including cheap access to raw materials, such as silica, increased capacity and improved technologies in recent years, improvements in the supply chain, and the cheap labor force that has always been the country’s main competitive advantage -account for the low price of Chinese solar panels.
Manufacturers argued that European protective measures could generate negative impacts on the global economic recovery.
While WTO antidumping cases against China have historically covered traditional industries, such as steel and chemicals, environment-related cases are not unheard of. In September 2008, German light bulb manufacturer Osram brought an end to a high-profile antidumping case against China over energy-saving light bulbs (see Bridges Trade BioRes, 5 September 2008, http://ictsd.net/i/news/biores/28646/).
ICTSD reporting; “China Racing Ahead of U.S. in the Drive to Go Solar,” NEW YORK TIMES; “Chinese Solar Firm Revises Price Remark,” NEW YORK TIMES, 26 August 2009; 24 August 2009; “Conergy, Solarworld Seek Protection From Chinese Price Dumping,” BLOOMBERG, 21 August 2009; “Not so sunny: trade war looms in solar space,” REUTERS, 7 September 2009; “Chinese Solar Company Suntech Is Busted For Admitting It Dumps Panels (STP),” BUSINESS INSIDER, 27 August 2009; “光伏巨首齐聚北京 商议反击”低价倾销”的指控,” SOUSOLAR, 10 September 2009.
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