Chinese PV firms face risks despite EU deal

The amicable solution to a dispute between China and the European Union (EU) over solar panels has brought benefits to China's photovoltaic (PV) industry but also poses potential risks to the Chinese companies.

According to a statement issued on Saturday by the European Commission, the EU has endorsed the price undertaking submitted by a bloc of Chinese solar panel exporters. The agreement takes effect on Tuesday and will expire in 2015.

The deal, reached after weeks of intensive talks following the EU's proposed decision in June to impose hefty provisional anti-dumping tariffs on solar panel imports from China, has also set a minimum price for imports from China.

EU Trade Commissioner Karel De Gucht said Chinese PV firms that signed the deal will take about 70 percent of the EU market while other Chinese PV companies will have to shoulder the anti-dumping tariff of 47.6 percent.

The EU also set a quota for annual imports from Chinese PV companies. Any imports above that limit would incur the anti-dumping tariff of 47.6 percent.

Though exports to the EU have been restricted, the compromise between China and Europe has prevented a trade war between the two major trade partners, said Tong Xingxue, president and CEO of LDK Solar Co., Ltd., a leading Chinese producer of solar equipment.

"Coming up with a price undertaking deal rather than imposing a high anti-dumping tariff is a positive move," said Qu Xiaohua, chairman of Jiangsu-based Canadian Solar Inc..

As the minimum price was set, leading PV enterprises which have their own brands, research and development strength and sales channels are expected to gain significant competitive advantages in the EU market, compared to smaller companies, according to Qu.

However, industry insiders have pointed out Chinese PV firms still face some potential risks.

Liang Tian, director of public relations at Yingli Green Energy Holdings Co., said China will have difficulty selling its PV products on the EU market if rivals from other Asian countries such as India, Malaysia and the Republic of Korea, joined the competition without being subject to the terms of the new deal.

Meanwhile, the annual limits of PV exports set by the EU will also pose risks for Chinese companies, Tong added.

Along with the recovery of the European economy, the EU PV sector is expected to see rapid growth in the future, which may result in a decline in the share of the EU market claimed by Chinese PV products, he said.

Industry insiders believe there are uncertainties about the price undertaking agreement itself.

Wang Bohua, secretary-general of the China Photovoltaic Industry Alliance, said Chinese solar panel companies have to enhance their product performance, improve quality and after-sale service so as to maintain their market share.

To reduce the risks, China should roll out detailed rules for the implementation of the price undertaking deal and tap the domestic market in the meantime, Tong urged.

Structural upgrading of China's PV industry has also been suggested. Promising companies should be supported by the government, according to Tong, who also called for domestic players to take this advantage to strengthen management of the industry.

China has already stepped up its efforts to explore the domestic market while implementing the price undertaking deal.

The State Council, China's Cabinet, issued a statement on July 15 to say it will target an annual domestic installation of 10 GW of solar energy between 2013-2015, with total installed capacity exceeding 35 GW by 2015.

A spokesman for the China Development Bank said the bank will provide a series of credit products to support these PV power projects.