At the beginning of 2025, the Chinese solar industry invested 875 billion yuan to expand production by 175GW, but in 2024, the severe overcapacity and plummeting product prices in the solar industry led to a widespread decline in corporate profits, causing many companies to operate at a loss. Analysis suggests that local governments’ construction of factories, equipment procurement, and substantial subsidies have become the main drivers for the solar industry’s counter-expansion.
According to the statistics from Huaxia Energy Network, in January 2025, there were 23 projects in the entire solar industry chain in China announced, signed, started, and under construction, with a total scale of nearly 175GW and total investment exceeding 875 billion yuan. Among these expansion projects, 18 companies invested over 1 billion yuan, with 3 companies reaching a scale of over 10 billion yuan.
Data released by the National Energy Administration of the Communist Party of China showed that in 2024, China’s newly added solar installation capacity reached 277GW, hitting a historical high, with a year-on-year growth rate as high as 28%.
While the Chinese solar industry is ramping up expansion, there is a severe overcapacity and price plunge. By the end of 2024, according to research by Zhongxin Jiandou, the production capacities of the main solar industry chain segments – silicon materials, silicon wafers, cell slices, and modules – all exceeded 1GW, with overcapacity in each segment being more than doubled.
According to the latest data released by the China Photovoltaic Industry Association, in 2024, the prices of polycrystalline silicon dropped by more than 35%, silicon wafers by over 45%, and cell slices and modules by over 25%.
At the 2024 National Solar Conference, Cao Renxian, Chairman of the Photovoltaic Industry Association, stated, “The industry is bleeding, with extremely low profit margins and virtually no profits,” and “Some companies are bidding below cost price, which is suicidal behavior.”
According to a reporter from the International Financial News, as of February 10, 43 solar companies have previewed their “report card” for 2024, with 31 of them reporting losses, accounting for over 70%, with a total net loss of over 50 billion yuan. Additionally, 38 companies reported their net profits declining year-on-year, accounting for nearly 90%.
Of the six major Chinese solar companies, only Jinko Solar achieved modest profits in 2024, while the other five companies collectively incurred a net loss of approximately 31 billion to 34.1 billion yuan.
An article from Huaxia Network pointed out that with the excessively friendly investment policies such as constructing factories, purchasing equipment on behalf, and even providing “turnkey” solutions, solar companies can expand their production capacity with minimal investment, fueling their ambitions for expansion. Even if a project eventually fails, the local government and investment institutions share the burden of the mess, sparing the companies from bearing the full loss.
In the eyes of local governments, these solar projects bear the responsibility of developing pillars of high-quality industries and employment opportunities for the people. Having already made significant investments in these projects, there is no turning back, and local governments are determined to see them through.
In a report on January 8, 2025, the “Shijing New Energy High-efficiency Solar Cell Production Manufacturing Base Project” energy report was approved. The project, located in Ziyang City, Sichuan Province, is owned by Sichuan Shijing New Energy Technology Co., Ltd., a joint venture between Suzhou Shijing Technology Co., Ltd. and Jinko Solar. With an investment of 4.1 billion yuan, the base will have an annual production capacity of 20GW of silicon wafers and 20GW of solar cell slices.
According to an announcement made by Shijing Technology on March 8, 2024, they and Jinko Solar will only pay for equipment procurement, with 35% coming from their own funds and the remaining 65% self-raised.
The project site, factory construction, mechanical and electrical facilities, and other construction costs are fully funded by the Ziyang Municipal Government, which also provides subsidies for new project construction, equipment procurement, rent, green energy policies, senior management, technical talent, and repurchase subsidies.
Wang Bohua, Chairman of the China Photovoltaic Industry Association, stated at the 2024 Photovoltaic Industry Supply Chain Development (Wenzhou) Conference, “Local governments have gotten deeply involved, turning many performance-based solar projects into performance-based engineering projects, making it very difficult to halt them.”
According to a recent report from Sichuan Economic Daily, this project in Ziyang is the first successful introduction of a billion-dollar mega project since the establishment of the city. Once fully operational, the project is expected to generate an annual output value of up to 20 billion yuan, creating employment opportunities for over 4,000 people.
According to its official website, Shijing Technology, with a registered capital of 100 million yuan, is an environmental pollution control comprehensive R&D manufacturing company that has no direct link to the photovoltaic industry.
As early as January 2023, Shijing Technology had a precedent of collaboration with local governments. On January 9, 2023, they signed an “Investment Cooperation Agreement for the High-Efficiency Solar Cell Production Project” with the Anhui Ningguo Economic and Technological Development Zone Management Committee, with a total investment not exceeding 11.2 billion yuan for a 24GW high-efficiency N-type monocrystalline TOPCon solar cell project.
However, in their response to the Shenzhen Stock Exchange on January 9, 2023, it was revealed that 2.5 billion yuan of the construction funds were provided by the government, 1.93 billion yuan from government subsidies, and only 350 million yuan from their own funds. All construction costs, including factory infrastructure, mechanical and electrical facilities, living quarters, and office facilities, were entirely covered by the Ningguo Municipal Government.
In addition to government-funded construction and equipment procurement, cash subsidies are also vital incentives for attracting solar companies to settle in various regions.
In a June 18, 2024 announcement, Jiangsu Lafon Biochemical Technology Co., Ltd. stated that its subsidiary, Xuhe Technology, received a total of 107 million yuan in subsidies from the government of Chuzhou City in 2024, accounting for 425.52% of the company’s latest audited net assets.
The 2023 annual report of the company stated that Xuhe Technology received a total of 108 million yuan in fixed asset investment subsidies in September and October 2023.
Established on July 14, 2022, Xuhe Technology is a solar energy company based in Chuzhou City, Anhui Province, engaged in the production of N-type monocrystalline silicon photovoltaic products. Similar to its parent company, Jiangsu Lafon and Shijing Technology, its main business has no direct relation to the photovoltaic industry, focusing primarily on producing insecticides, fungicides, herbicides, and fine chemical intermediates.
Wang Bohua, Honorary Chairman of the China Photovoltaic Association, previously pointed out, “Local governments have created waves of support, with financial institutions following suit, leading to an influx of cross-industry enterprises, ultimately resulting in an imbalance between supply and demand in the industry.”
In September 2024, “Deepwater Finance and Economics Society”, a global listed company market value research organization, highlighted that in the process of industrial investment attraction, government-funded construction has unconsciously become a standard practice. Local governments often promise to build factories on behalf of solar companies. if they don’t, various other preferential policies will be in place.
In a post on its official Weibo account in July 2024, Gan Carbon Technology (Shanghai) Co., Ltd. mentioned that as the solar industry spiraled out of control, very few enterprises were actually willing to invest substantial sums of money. At the end of the day, it is the local governments that bear the brunt of the consequences.
On June 30, 2023, Hwasin Group Co., Ltd. stated on the investor interaction platform that the 20GW TOPCon Solar Cell Project with a total investment of 10 billion yuan had its factory and mechanical facilities built by the Fuyang Municipal Government.
In a response to the Shenzhen Stock Exchange’s concerns on June 15, 2023, Hunan Huamin Holdings Group Co., Ltd. mentioned that the 10GW pull-rod slicing project and the additional 10GW pull-rod 4GW slicing project with a total investment of 4 billion yuan followed the “build-lease-buyback” model. More than 1.3 billion yuan was invested in project construction, including the construction of new production workshops, warehouses, and factory area supporting facilities, and were built by the government of Xiangyun County, Yunnan Province.