Posted on 10/10/2013 1:41:24 AM PDT by TexGrill
China has put forth new rules to tackle overcapacity in its solar power industry. A document released by the Ministry of Industry and Information Technology (MIIT) specifies the thresholds needed to enter the (PV) industry and is sure to keep plenty of capital at bay.
Under the new rules, access to the industry will be strictly controlled. For instance, investors who wish to enter the industry must now invest a minimum 20 percent of the value of the desired project. There are also minimum requirements for investment in research and development. Only a few domestic PV enterprises can meet the requirements, says Wang Yong, an analyst with CITIC Securities Co. Ltd., so most small and medium-sized enterprises are likely to be washed out of the industry.
China's PV modules are mainly exported to Europe and the United States, and tax rebates are a big source of income for PV enterprises, which led to trade frictions with the above-mentioned importers. According to the new rules, however, unqualified PV manufacturing enterprises and projects won't enjoy export tax rebates or favorable support for domestic sales.
Before the MIIT released this latest document, investors had plenty of freedom to invest wherever and how much they wished in the country's solar power industry, leading to severe overcapacity and disorderly development. Wang says the MIIT's document is a late remedy but still welcome.
More M&As
According to the MIIT figures, total liabilities of China's top 10 PV enterprises have surpassed 100 billion yuan ($16.26 billion). In the first half of this year, 80 percent of PV enterprises suspended their production.
(Excerpt) Read more at bjreview.com.cn ...
An example of a market formed by Government intervention - in this case in the form of tax rebates. Note that competition in this 'market' has become strongly focused on qualifying for the rebates.
A malinvestment train-wreck in progress.
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