China has proposed a draft regulation to curb the expansion of its solar industry in response to global concerns about solar panel overcapacity. This move follows criticism from President Joe Biden, former President Donald Trump, and Treasury Secretary Janet Yellen.
What Happened: The Chinese government has introduced a draft regulation to limit the expansion of its solar industry, Bloomberg reported on Tuesday. This move comes as domestic companies face losses due to oversupply and intense competition.
The regulation, released for public consultation by the Ministry of Industry and Information Technology on Tuesday, will restrict new manufacturing projects that merely increase existing capacity. Companies will be directed to focus on improving quality and reducing production costs.
China’s solar manufacturers have seen their capacity exceed demand in recent years, leading to record-low prices and forcing many to sell below cost. The industry has repeatedly called for government intervention to alleviate the oversupply.
The draft regulation also mandates higher efficiency in products from existing and new factories, along with minimum requirements for research and development spending.
Why It Matters: The proposed regulation is a response to global concerns over the overcapacity of solar panels. This issue has been a point of contention in international trade discussions, particularly between China and the U.S.
In April, U.S. Treasury Secretary Yellen voiced concerns about Chinese industrial policies, including government subsidies and manufacturing overcapacity, which have led to a flood of cheap clean-energy product exports around the world.
Yellen also discussed potential strategies to counter threats from China's excess industrial capacity. In May, President Joe Biden announced massive tariffs on a range of Chinese goods to protect the American economy and safeguard domestic jobs, a move aimed at countering China's heavily subsidized production.
China has responded to the G-7 nations' criticism of its trade practices, accusing them of exaggerating the issue of overcapacity. The proposed regulation is a significant step by China to address these concerns and stabilize its solar industry.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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