China's massive subsidies for its solar panel industry
In a new article in Harvard Business Review, Usha C.V. Haley and George T. Haley document the effect of China's massive government subsidies on its solar panel industry. They argue that these subsidies have helped Chinese manufacturers produce technologically advanced products while undercutting foreign manufacturers.
According to their research, since 2008, government subsidies have helped the manufacturing capacity of China's solar-panel industry grow tenfold, leading to a vast global oversupply:
A surge in exports of Chinese panels depressed world prices by 75%. In 2012, China's top six solar companies had debt ratios of over 80%. Our research showed that without subsidies, these companies would be bankrupt. If the Chinese government sticks to its decision to stop funding unprofitable solar-panel manufacturers and support a revamping of the industry, more bankruptcies and restructurings are sure to follow.
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