Lessons and reflections from the decade-long decline of the photovoltaic industry
June 26 11:36:06, 2025
**Abstract**
Premier Wen Jiabao of the State Council chaired a meeting of the State Council Executive Committee on the 19th to thoroughly examine and analyze the challenges facing the photovoltaic industry, and to establish policies aimed at ensuring its sustainable and healthy development. Among various emerging industries, the photovoltaic sector has gained significant attention in China, but it also faces serious issues.
In recent years, the photovoltaic industry has experienced a dramatic shift—from a promising sector to one marked by overcapacity and financial difficulties. In just a decade, the industry moved from being a "bright spot" to a "red flag," and even a "black cloud." This rapid transformation highlights the need for more thoughtful and strategic planning.
The role of the government in shaping the industry has been pivotal. Local governments have acted both as catalysts and obstacles, driving the establishment of numerous solar cities and photovoltaic parks across the country. However, this heavy-handed approach has led to overdevelopment and inefficiency. In a market-driven economy, companies should make decisions based on market conditions, not follow government directives blindly. Unfortunately, many Chinese enterprises lack the ability to independently assess market trends, leading to poor investment choices and widespread financial distress.
Once seen as a key driver for industrial restructuring, the photovoltaic industry now faces deep structural problems. For it to truly contribute to economic transformation, a fundamental reorganization of the industry is necessary. When local governments and businesses prioritize short-term gains over long-term sustainability, meaningful reform becomes difficult.
The rapid decline of the industry also reveals that emerging sectors must be built on innovation, high technology, and efficiency. The current situation, where many low-tech projects dominate, has undermined the industry’s potential. To become a real emerging industry, large-scale integration and the elimination of outdated technologies are essential.
Planning plays a crucial role in the growth of any industry. Yet, China's photovoltaic sector has grown rapidly—often without clear or consistent strategies. The repeated adjustments to the "Twelfth Five-Year Plan" goals illustrate the lack of coherence in policy-making.
Policy guidance is vital for industrial development. A well-designed policy can drive progress, while flawed policies lead to instability. In the case of the photovoltaic industry, the current support system lacks precision. Subsidies are often based solely on electricity output, without considering technological advancement or efficiency. This has left Chinese firms at a disadvantage globally, with limited control over core technologies.
The rise of the industry was also fueled by the return of overseas talents after the financial crisis. However, the quality of these professionals varies widely, and the intense competition has created internal imbalances. Many companies focused on following the trend of "sea returnees," which ultimately contributed to the industry’s instability.
Additionally, China underestimated the impact of trade barriers like anti-dumping investigations from developed countries. A lack of balanced market strategy has hindered both domestic and international expansion.
While the government needs to support struggling enterprises, it must do so strategically and selectively. Rescue efforts should not be arbitrary or limited to individual cases. The five measures proposed by the central government address both symptoms and root causes, offering a comprehensive solution. Local governments must carefully implement these guidelines to ensure the industry’s long-term success.
Despite the challenges, the photovoltaic sector remains a critical part of China’s economic and industrial transformation. With the right strategies and reforms, the future of the industry still holds great promise.