By Hepeng Jia/Beijing, China 

Though proposed European investigations into alleged dumping by the Chinese solar power industry are unlikely to become real trade punishments, experts warn the move should prompt China to change the development model of the fast developing solar industry. 

’If [the dumping allegations] transformed into action, the impacts would be huge,’ says Wang Yuehai, executive secretary general of the Chamber of New Energies under the All-China Federation of Industry and Commerce. 

Wang is referring to recent proposals by European photovoltaic panel makers such as Germany-based firm Solarworld to ask the European Union to impose special anti-dumping tariffs against Chinese products.

More than 90 per cent of Chinese photovoltaic products are produced for export. According to a report by Swiss investment bank UBS, Chinese photovoltaic products were 20 per cent cheaper in European markets than their local counterparts. 

The allegations were initially triggered by a New York Times interview with Shi Zhengrong, chairman of China’s largest photovoltaic product maker Suntech Power, in which Shi hinted that government subsidies can help the company’s products enter the US market. 

The report raised wide concerns in the European solar power industry, with anger that low-cost Chinese products are a result of government subsidies. 

So far, European Union authorities have yet to take an official stance on the situation. 

After the report, Suntech denied that exports to the US market had been subsidised by the government, and said that the media had misunderstood Shi’s comments. 

’The fact is in China, there is no subsidy to manufacturers,’ Wang told Chemistry World. ’The government offers some subsidies to users to increase the domestic application of solar power.’

Zhan Wenhui, a new energy analyst at Haitong Securities, says that the solar power industry in China has become a labour and capital intensive industry, and its lower costs are a result of cheaper labour, equipment, and energy prices. 

’In this sense, it is no different to any other industries which often become victims of trade wars in many parts of the world,’ Zhan told Chemistry World. 

But she warns that even if Chinese manufacturers are safe this time, their rapidly expanding manufacturing capacity and the heavy reliance on exports could soon lead to further trade disputes.

Rapidly increasing production capacities have also raised government vigilance. 

According to the National Development and Reform Commission (NDRC), polysilicon output was 4100 tonnes in 2008, but is expected to surge to 40,000 tonnes by the end of 2009. Photovoltaic products keep the same pace of growth. 

Earlier this year the NDRC decided to exclude polysilicon from its list of preferred imports, inclusion on which allows products and technologies to enjoy low tariff rates and receive interest subsidies from the government. The material was excluded because of China’s overproduction of polysilicon for photovoltaic cells.

But Zhao Yuwen, vice-chairman of the China Society of Sustainable Energies, says judgment of polysilicon oversupplies may be inaccurate, because many ongoing projects could be suspended if market demands decrease. 

Zhao’s opinion is echoed by Wang. ’The problem was not overproduction, but poor domestic use,’ he says. ’The government needs to increase its supports and subsidies to increase the nationwide applications of solar power generation and products.’