- With over 80% of global production, China’s solar dominance reshapes global trade and supply chains and forces other economies to adjust their strategies.
- U.S. and EU protectionist measures, including tariffs and subsidies, struggle to compete with China’s low-cost production and advanced technologies.
- Geopolitical tensions and emerging trade norms, such as Europe’s carbon footprint standards, complicate supply chains and may challenge China’s long-term dominance.
China, the global leader in solar energy, is driving a significant shift in trade rules, dominating the photovoltaic (PV) panel industry. Controlling over 80% of global production, China’s actions push major economies to rethink their industrial strategies, heightening tensions and triggering supply chain changes worldwide.
Since the early 2000s, China has aggressively pursued leadership in the solar sector. Its industrial clusters integrate every production stage, from polysilicon to final modules, allowing Chinese firms to cut costs and outpace Western competitors. Subsidies, cheap land, and preferential loans further bolster China’s position.
Manufacturers like LONGi and Trina Solar invest heavily in advanced technologies such as tunnel oxide passivated contact (TOPCon) cells, boosting efficiency and lowering costs. This technological edge, combined with strong infrastructure and government support, strengthens China’s control over the market.
The United States and the European Union have responded with protectionist policies. The U.S. imposed anti-dumping duties in 2012, followed by additional tariffs in 2018. The 2022 Inflation Reduction Act (IRA) offered 30% subsidies for domestic solar investments, but U.S. production costs remain about three times higher than China’s.
Chinese firms have sidestepped these barriers by shifting production to Southeast Asian countries like Thailand, Vietnam, and Malaysia. These have emerged as key hubs for reassembling solar modules for Western markets.
In Europe, protectionist efforts have also faltered. The EU lifted tariffs on Chinese products 2018 to promote solar adoption, which only solidified China’s dominance. The Carbon Border Adjustment Mechanism (CBAM), which taxes carbon-intensive materials like aluminium, has had limited impact on the solar sector.
China’s solar overcapacity continues to disrupt global markets. Its production far exceeds domestic demand, flooding international markets with low-cost panels. While this accelerates solar adoption worldwide, it threatens local industries, particularly in countries lacking protective tariffs.
Geopolitical factors further complicate supply chains. U.S. restrictions on products linked to forced labour in Xinjiang, the world’s largest polysilicon supplier, have disrupted global supplies. The Uyghur Forced Labor Prevention Act (UFLPA), passed in 2021, blocks imports from Xinjiang, forcing companies to seek alternative sources, which increases costs and delays.
Chinese manufacturers have responded by diversifying production to Southeast Asia and the Middle East, where lower costs and modern infrastructure attract investment. However, this diversification complicates logistics and increases delivery times for Western markets.
Emerging European trade norms, such as the CBAM and stricter carbon footprint standards, now shape public procurement decisions. These regulations effectively shut out many Chinese manufacturers who cannot meet environmental requirements. While these rules promote more sustainable practices, they raise consumer costs and limit access to affordable solar panels.
As global trade tensions intensify, China retains an edge through scale and innovation. However, Western protectionist measures and new regulations may challenge its dominance. Western nations must find ways to reduce dependence on Chinese products without driving up solar costs.