Chinese Solar Panels and the Age of Deglobalization
The rapid rise of China’s solar PV manufacturing industry has been both an engine and a risk for the global energy transition. Today, solar has become the world’s most cost-competitive clean power generation option, largely thanks to the economies of scale reached in China which significantly bent the cost curve. At the same time, the flooding of cheap Chinese solar panels cost the West almost an entire competing industry. Since the 2010s, the US and EU have imposed rounds of antidumping and countervailing duties to preserve domestic solar sectors. These tariffs fueled the Chinese industry’s bust phase and kickstarted the government’s large-scale subsidy program to expand domestic markets. Chinese solar firms also significantly relocated their supply chains for tariff circumvention purposes.
Trade frictions have only intensified over the past few years. Geopolitical anxieties over heavy reliance on Chinese solar panels, as well as new tensions over the environment, sustainability, and governance aspects, dominated the agenda of Western politicians. By crafting a comprehensive set of actions involving tariffs, sanctions, import bans, and industrial policies with the goal of achieving import substitution, the West has projected unprecedented economic forces over China’s solar industry. As scant existing literature analyzes the issue and its implications in detail, this paper will attempt to systematically analyze all relevant Western policies drafted and in force, followed by an examination and quantification of the trade volume of solar products affected. It will then analyze the potential relocation routes for China’s solar PV supply chain to circumvent trade measures. Lastly, the paper will explore how the loss of external demand could impact industry development in China.
