Pact with EU signals struggle for survival

Updated: 2013-08-06 06:47

By Xie Yu in Shanghai and Yao Jing in Beijing (China Daily)

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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 financial 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.