The European Union launched an investigation on Thursday into alleged state subsidies for Chinese solar panel manufacturers, intensifying a trade war between the two centred on the multi-billion dollar solar power market.
The EU’s executive body is already studying Chinese dumping of solar panels, or deliberately selling products for less abroad than at home or at less than cost. It is the largest import sector it has ever targeted for such investigation.
The latest subsidy case followed a complaint by the EU ProSun group of 25 European solar panel companies led by Germany's Solar World, the same group that had complained of dumping. EU Prosun says subsidies from Beijing made available only to local firms have stimulated production there to more than 20 times Chinese consumption and close to double the global demand, and averted local bankruptcies.
Over the past week, China has lodged a complaint with the World Trade Organisation alleging Italy and Greece have illegally promoted domestic panel producers and warned it could put tariffs on EU exports of the raw material polysilicon.
The EU is China’s biggest trade partner. For the bloc, China is second only to the United States. However, relations have been tense, with EU Trade Commissioner Karel De Gucht complaining China subsidises nearly everything.
EU ProSun says Chinese panel makers have benefited from very low interest rates thanks to government policy, and if loans can’t be paid back they might be written off, extended indefinitely or paid off by government-controlled entities.
Chinese companies sold about 21 billion euros ($26.8 billion) of solar panels and components to the EU in 2011 — about 60% of all Chinese exports of the products and some 7% of all Chinese exports to the EU. Chinese producers include Yingli Green Energy, Suntech Power Holdings Co Ltd and Trina Solar Ltd.
Trina says Chinese solar companies' cost advantages are due to their high levels of manufacturing leading to economies of scale, rather than any state subsidy.
“While it produces photovoltaic modules at levels of over 1000 MW, many European manufacturers produce only in smaller levels of several hundred megawatts,” it says.
EU ProSun says Chinese producers have reached a market share of more than 80% in Europe with the help of export subsidies, while a string of European solar companies, including former bellwether Q-Cells, have filed for insolvency.
Western solar firms have been at odds with their Chinese counterparts for years, alleging they receive lavish credit lines to