Pact with EU signals strug­gle for sur­vival

China Daily (Hong Kong) - - BUSINESS - By XIE YU in Shang­hai YAO JING in Bei­jing

Chi­nese so­lar com­pa­nies will have to com­pete for quo­tas to ex­port to the Euro­pean Union and strug­gle to sur­vive at min­i­mum prices, fol­low­ing the bi­lat­eral set­tle­ment of one of the big­gest trade dis­putes in the world, in­dus­try in­sid­ers said.

The Euro­pean Com­mis­sion said on Fri­day that it en­dorsed a ne­go­ti­ated set­tle­ment with China that sets a min­i­mum price and a vol­ume limit on EU im­ports of Chi­nese so­lar panels through the end of 2015.

Chi­nese man­u­fac­tur­ers that par­tic­i­pate will be spared EU du­ties meant to counter al­leged “dump­ing” ac­tiv­i­ties.

The Xin­hua News Agency quoted sources who took part in the ne­go­ti­a­tions as say­ing the agree­ment fixes a min­i­mum price of 56 euro cents (74 US cents) a watt for an­nual im­ports from China of as much as 7 gi­gawatts.

Zhang Longgen, chief fi nan­cial of­fi­cer of Jiangxi Jinko So­lar Co Ltd, a lead­ing so­lar man­u­fac­turer, said the re­sult was “bet­ter than ex­pected”.

Ac­cord­ing to Zhang, ex­ports to Europe this year will reach about 400 to 500 megawatts and take up 20 to 30 per­cent of the com­pany’s to­tal sales, which will be as ex­pected.

The terms of the agree­ment will def­i­nitely af­fect sales and prof­its, he said, but had there been no set­tle­ment, the anti- dump­ing du­ties would have been “dis­as­trous” for Chi­nese so­lar com­pa­nies.

The EC had de­cided ear­lier that lack­ing an agree­ment. a 47.6 per­cent puni­tive duty was to start as of Tues­day, and it would ap­ply to about 130 Chi­nese pro­duc­ers that co­op­er­ated in the in­ves­ti­ga­tion.

Xin­hua said 95 Chi­nese com­pa­nies in­volved in the dis­pute par­tic­i­pated in the ne­go­ti­a­tions and signed the agree­ment.

An­a­lysts said the set­tle­ment avoids a “hard land­ing” for Chi­nese so­lar com­pa­nies, whose ma­jor ex­port mar­ket is Europe.

How­ever, the com­pe­ti­tion for quo­tas among Chi­nese com­pa­nies will be more than fierce.

“We are closely fol­low­ing up the dis­tri­bu­tion meth­ods for the ex­port quota,” said Eric Liu, deputy gen­eral man­ager of Up­so­lar, a pho­to­voltaic mod­ule pro­ducer.

It forces China to adopt a planned econ­omy in this sec­tor, which will make things “com­pli­cated”, he added.

As for Up­so­lar, it is ac­tively seek­ing over­seas orig­i­nal equip­ment man­u­fac­tur­ers to avoid the trade bar­ri­ers in Europe and the United States.

Al­though the limited quota will hin­der big pro­duc­ers’ sales in the EU mar­ket, it will help Chi­nese so­lar com­pa­nies think more about their long-term strat­egy, said Huang Kunghui, re­search man­ager at Trendforce, a provider of mar­ket in­tel­li­gence, anal­y­sis and con­sult­ing ser­vices in Shang­hai.

As for big com­pa­nies, the quota and price are both in the rea­son­able and ac­cept­able range, he said.

The set­tled price will prompt big play­ers to pay more at­ten­tion to qual­ity and ser­vice, not com­pet­ing with smaller mak­ers just in terms of price, he added.

Small com­pa­nies will strug­gle with a tough sit­u­a­tion. The set­tle­ment will push out some small ones be­cause of their poor qual­ity and low prices, Huang said.

The high du­ties im­posed ear­lier by the US did push some Chi­nese PV pro­duc­ers to de­velop other mar­kets, such as Ja­pan, and to move into the do­mes­tic mar­ket.

The Chi­nese govern­ment has been work­ing to in­crease de­mand in the do­mes­tic mar­ket. In July, it raised the 2015 tar­get for cu­mu­la­tive in­stalled PV ca­pac­ity to 35 mil­lion kW from 21 mil­lion kW pre­vi­ously.

The govern­ment is also en­cour­ag­ing the ex­pan­sion of small-scale, dis­trib­uted PV gen­er­a­tion, such as res­i­den­tial in­stal­la­tions or in­dus­trial zone so­lar plants, through­out the coun­try.

The trade dis­pute put Chi­nese com­pa­nies’ weak­nesses un­der a mi­cro­scope, Huang said.

Pro­duc­ers should fur­ther build their brands and im­prove their qual­ity to in­crease their added value, so they can stop re­ly­ing on price as the only way to com­pete, Huang said. Con­tact the writ­ers at xieyu@ chi­nadaily.com.cn and yao­jing@ chi­nadaily.com.cn

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