The Chinese government is pushing for a drastic shakeout of the country's overcrowded solar cell industry, supporting only a quarter of players and practically telling the rest to get out of the business.
The Ministry of Industry and Information Technology has announced a list of 134 producers of silicon materials, solar panels and other components of photovoltaic systems as meeting certain conditions, as measured by 2012 production, capacity utilization and technical standards.
In a sector said to have more than 500 companies, the ministry's move means that three-quarters didn't make the cut -- including the core subsidiary of Suntech Power, which went bankrupt in March, and Jiangsu Shungfeng Photovoltaic Technology, Suntech's startup rescuer.
These firms will not be able to get credit lines from financial institutions and thus will have a tough time borrowing, according to industry insiders. They will also no longer be eligible for refunds of export tariffs, a huge blow to companies that depend on overseas business. On the home front, it will be difficult for them to participate in state-run utilities' auctions, sharply curtailing their opportunities to win orders.
amid slowing demand in Europe, the world's largest market.
The country's trade friction with the U.S. and Europe is not helping, either. Even Suntech, which became the world's top solar cell producer at one point, saw its core subsidiary go under.
Midsize businesses are staying afloat only because of support from local governments.
In China, markets offering high margins tend to attract scores of entrants, often resulting in oversupply situations. The government has declared excess capacity in several other industries, including steel, cement and shipbuilding, and is calling for consolidation.