China rejects “theory” of unfair solar PV production subsidies at Scholz’s Beijing visit

Chinese prime minister Li Qiang has rejected criticism about his country’s trade practices, which European companies have argued distort markets for solar panels and other products by subsidising enormous overcapacities that undermine competition. Li, speaking after a meeting with German chancellor Olaf Scholz in China’s capital Beijing, said the “theory about Chinese overcapacities” lacked a wider perspective.

“The claim that the Chinese industry’s advantages are formed by subsidies does not correspond to the facts,” he said, arguing that “appropriate overcapacities” would lead to “complete competition and survival of the fittest”. Comparative advantages in production held by individual countries could be made mutually beneficial if they are embedded in cooperation, Li said. “One should not arbitrarily judge which country has overcapacities,” he concluded. The world still needs “massively more” solar PV installations on its path to carbon neutrality, Li said.

He argued that subsidies in China are in line with the World Trade Organisation's (WTO) rules and do not fundamentally differ from the “current practice” in many other countries. “Renewable energy products are so competitive because we have made long-term investments in research and development and subsequently accumulated technical capabilities,” he said. Moreover, China was helped by its vast industrial basis, its internal market and huge labour capacity. “That’s why we have this comprehensive competitiveness or advantage,” he insisted.  However, Chinese companies could also go bankrupt in open market competition, which had already happened, especially in the renewables sector, he added.

Overproduction and product dumping from China has been singled out by industry representatives as one of the main reasons German and European solar PV manufacturers have struggled to benefit from the current global solar expansion boom. China’s success in supplying western buyers with modern technology has previously severely hit the budding solar PV industry in Germany. Economic research institutes have warned that the Asian economic heavyweight could also undermine Germany’s position as a leading exporter in other technologies, for example regarding wind turbines or passenger cars amid the shift to electric vehicles.

German economic research institute IfW Kiel published an analysis in the week ahead of Scholz’s trip in which it found China to “particularly” support clean technology production. The institute said that this contributed to the country having an output of certain products that is up to nine times higher than that of similarly supported products in countries like Germany or the US. Chinese e-carmaker BYD would especially benefit from generous support, the institute said. "China's subsidy policy has been a controversial issue for years: European industries often struggle to compete with Chinese counterparts on price. However, without China's subsidized technology, products crucial for Germany's green transformation would become more expensive and scarce as well," said IfW researcher Dirk Dohse.

Germany itself has long been criticised by allied nations for its policy of running a trade surplus enabled by an industry that is focused on exports rather than on satisfying domestic demand. However, the EU has launched several probes into Chinese trade practices, which could lead to import restrictions if these are found to be problematic.