China’s solar sector is encountering significant challenges due to falling demand and decreasing prices for solar products. The Ministry of Industry and Information Technology (MIIT) is taking action to address these issues, focusing on reducing disordered competition and promoting sustainable development.

The MIIT recently hosted its 15th roundtable with manufacturing firms, where they discussed measures to curb aggressive pricing and boost efficiency. The ministry urged companies to adhere to regulations, enhance product quality, and systematically phase out outdated production capabilities.

The solar supply chain is currently facing intense pricing pressures. Since late February, prices for silicon wafers, a fundamental component in solar cells, have dropped by approximately 20%, while polysilicon (the raw material for silicon wafers) has seen a 16% decline.

Global installed solar capacity is forecast to decrease by 5% year-on-year in 2025, reaching around 520 gigawatts. Domestically, new installations are anticipated to fall by about 10% year-on-year, estimated at 240-250 gigawatts for the same period.

Despite the MIIT’s reform initiatives aimed at stabilizing the industry, persistent weak demand and inventory concerns continue to exert downward pressure on prices.

Preliminary data from InfoLink, a global market research firm specializing in renewable energy, suggests that further price declines for solar cells could occur due to ongoing supply-demand imbalances.

🔗 Source: Yicai

🧠 Food for thought

1️⃣ Historical patterns of boom-bust cycles in China’s solar sector

China’s solar industry has experienced similar challenges before, most notably during the “China-531” policy implementation in 2018, which led to significant market corrections.

When the government cut subsidies in 2018, silicon module prices dropped by 20%, solar cell prices fell by 52%, and polysilicon prices decreased by 30%, creating a major market adjustment similar to today’s price pressures 1.

The current situation follows a familiar pattern where government policy shifts trigger market corrections, as seen when Chinese solar installations dropped from 53 GW in 2017 to 30-40 GW in 2018 after subsidy reductions 1.

China’s solar manufacturing structure inherently creates a cycle of boom-bust dynamics, where capacity expansions lead to oversupply, price collapses, market consolidation, and eventual recovery 2.

The industry’s structure and government-directed growth have historically produced these cycles, with China producing two panels for every one sold internationally during previous oversupply periods 2.

2️⃣ Transition from subsidy-dependent to market-competitive solar industry

The current challenges mark a pivotal point in China’s solar industry evolution as it shifts from government subsidy dependence to market-based competition.