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China Fights EU Dumping Tariff; Plans to Boost Solar Sales Abroad

After the recent flap over the European Union’s decision to impose a tariff on solar panels dumped in the region from China, as well as the perhaps surprising news that China’s Suntech went into bankruptcy, one might think that Chinese cutbacks in production and export of solar panels might follow. However, that reading of the situation is likely wrong, since solar, along with wind, looms large in China’s energy plans, both domestically and abroad.

China has grown its presence in the EU solar panel market at a remarkable pace, considering that just a few years ago it was at nearly zero. Now its market share is over 80%, according to the European Commission, and its current rate of production is estimated by the EC to be at 1.5 times global demand.

With cutbacks everywhere affecting the solar panel industry globally, it added insult to injury when the EU said it had proof that China was dumping—selling its solar panels across the region at below-production costs. So in May, EU Trade Commissioner Karel De Gucht announced that he would penalize China, adding a punitive tariff in June to solar panels to compel China to halt the practice. The U.S. had already imposed trade sanctions on China’s solar panels in 2012, though the U.S. measures do not place a tariff on the wafers that are used to make solar cells. The EU sanctions do.

But instead the Chinese, who have sold about 21 billion euros ($27 billion) of China-manufactured solar panels in the EU, began pressuring EU member states to oppose the move. Among the 18 countries expressing their displeasure at the notion were Germany and England, fearing repercussions against their own entry into the telecommunications and financial services markets in China. The Netherlands and Sweden have also expressed their concern about Chinese retaliation against their own business interests there. However, France and Italy are firmly in support of the move, saying that the Chinese government has illegally supported dumping in the EU, costing thousands of European jobs in the process.

They may be right.

The tariff went into effect in early June, at a surprisingly low rate of only 11.8%. China has two months at that rate to correct the situation; if it fails to rein in dumping, the tariff will increase to a range of 37.2% to 67.9% on Aug. 6. Should China still fail to halt the practice, in December the higher rate range will become effective for five years.

In addition to China leaning on EU member states in an attempt to circumvent the tariff, its diplomats in Brussels issued a statement at the end of May warning that if trade sanctions went into effect, “the Chinese government would not sit on the sidelines, but would take necessary steps to defend its national interest.”

It is apparently moving to do so. In an ironic shift, it is moving, or preparing to move, much of its solar panel manufacturing off the mainland to countries including South Africa, Portugal, Thailand, Istanbul, Taiwan, Saudi Arabia, Turkey and Malaysia—as well as countries across Europe. Outsourcing its production to countries that are not bound by the tariff will allow China to continue to fill the demand abroad.

The country is already well positioned to expand its solar technology internationally, and indeed has been doing so for some time. Authors Xiaomei Tan, Yingzhen Zhao, Clifford Polycarp and Jianwen Bai stated in a report from the World Resources Institute titled “China’s Overseas Investments in the Wind and Solar Industries: Trends and Drivers,” that not only have Chinese companies been buying into existing businesses, acquiring companies to acquire technology and seeking out ways to work on energy development projects elsewhere, they have had the support of the Chinese government in three ways: “policies (both general and specific to the wind and solar industries) that ‘push’ Chinese companies to invest overseas; policy incentives in host countries that ‘pull’ Chinese investors; and financial support from Chinese banks that ‘enables’ these investments.”

Add to that global market conditions that have smiled on many Chinese energy projects, and Chinese investments in other countries have proved to provide ways in which those countries can continue to move toward renewable energy development at lower costs than by relying on their own financing.

“By some estimates, China is already the leading global investor in renewable energy infrastructure, and is increasing its overseas investments in renewable energy, particularly solar and wind. If China achieves its goal of sourcing 15% of its energy mix from renewables by 2020 and 30–45% by 2050, renewable energy will become closer to a mainstream energy resource within the country,” the authors stated.

China is actively working toward those goals. The country has embarked on an active renewable energy policy that, according to Bloomberg New Energy Finance, should allow it to become one of the top two solar markets in 2013; the other top market is projected to be Japan.

China’s National Energy Administration issued a statement at the end of June saying that local Chinese governments should look into policies that support solar energy development in their districts, and look for new markets into which the technology can expand. The government has also promised easier financing for solar manufacturers.

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