The dispute between the European Union and China over solar exports could hurt bilateral trade and the livelihood of more than 400,000 Chinese workers. Provided to China Daily

Both sides stand to lose if ruling goes against China, chinese official says

A top Chinese official has called for the European Union to be careful about the way it handles the dispute over the country's solar product exports and has warned of counter measures should there be an unfavorable ruling.

"We have no intention of having a trade war with any country, especially one between China and the EU, because neither side can afford the losses," says Chong Quan, deputy international trade representative with the Ministry of Commerce, on March 25.

"If the EU insists on imposing duties on Chinese exports that severely harm the interests of Chinese manufacturers, the government will not stand by and do nothing. We will have no choice but to take measures to protect the legal rights of Chinese businesses.

"Once again we call for the EU to seriously consider China's submissions as well as appeals from EU solar industry businesses, upstream and downstream, and to cautiously use trade remedy measures. We hope the dispute can be resolved through negotiation."

After the United States imposed anti-dumping tariffs of up to 249.96 percent and countervailing duties of up to 15.97 percent in November, the EU announced that it would investigate alleged government subsidies for Chinese solar panel manufacturers. The case is separate from an inquiry into China's alleged "dumping" of such products in European markets that began in September.

China's exports of solar products to the EU last year were worth more than $20 billion (15.6 billion euros), equivalent to 70 percent of the value of Chinese trade subject to investigations that the EU began last year.

The country's solar industry has faced unprecedented challenges since last year because of drops in prices worldwide and trade investigations by the US and the EU, Chong says.

Chinese exports of solar products fell 35 percent last year compared with the year before, with exports of solar panels and modules down by more than 40 percent. The China-EU dispute will affect more than 400,000 Chinese workers and "if the case is handled wrongly it will definitely have a severe impact on China-EU trade ties", Chong says.

The EU is due to issue a preliminary anti-dumping ruling in early June and an anti-subsidy ruling in August. The China Chamber of Commerce for Import and Export of Machinery and Electronic Products says a negative ruling would inevitably affect bilateral trade and employment because the industrial chains for solar products between China and the EU are highly complementary.

"Compared with the US investigation, the impact of the EU inquiries is wider, and bigger sums are at stake, so they pose a bigger challenge to China's solar industry," says Liang Tian, a spokesman for Yingli Green Energy Holding Co Ltd, one of the world's largest PV makers.

"A highly onerous order imposed by the EU would deal a fatal blow to China's solar industry."

As trade investigation findings loom over the solar industry, a Chinese court has ordered Suntech Power Holdings Co, one of the world's leading panel makers, to undertake "bankruptcy reorganization".

The state-owned Wuxi Guolian Development (Group) Co was reported to be ready to acquire the company wholly or partially.

The EU, after opening an inquiry into Chinese exports of solar glass in February, ordered its member states on March 5 to register imports of Chinese solar panels and their main components, an administrative step underscoring punitive duties to be applied retroactively if there are findings against the Chinese companies.

On March 8 former commerce minister Chen Deming said on the sidelines of the annual session of the National People's Congress that EU politicians and business people needed to handle the dispute in such a way that neither side would come out losing.

The Alliance for Affordable Solar Energy, a coalition of almost 300 companies in the European PV industry, including importers and project developers, said in an open letter on March 21 that the legal requirements imposing anti-dumping and anti-subsidy measures had not been met and would cause disproportionate damage to the EU's PV value chain, which constitutes a significant segment of the solar industry.

A report by the German thinktank Prognos that the alliance commissioned says production of solar products in the EU may rise, but total demand would fall because of the extra cost of solar products, which would hit the solar industry in Europe and other export industries supplying China.

It predicted job losses of between 170,000 and 240,000 in the EU and losses of between $24 billion and $36 billion over three years. Germany would suffer most, followed by Italy, Spain and Britain, it says.

"If such an anti-dumping complaint is successful this would harm the entire sector," says Norbert Hahn, a member of the executive board of the German company IBC Solar.

"Seventy to 80 percent of the modules installed in Europe would then be levied with punitive tariffs. Therefore profitability and demand would decrease. This is how a market economy works. From our perspective all trade barriers need to disappear in order to accelerate the energy transition, (including) through the expansion of photovoltaic."

China has imported solar equipment worth tens of billions of yuan, Chong says, and a significant part of that has come from the EU.

"We ask that the EU objectively and rationally analyze the reasons behind the crisis in the PV industry and treat our PV industry fairly and impartially. We hope it will use industry dialogue and mutually beneficial cooperation to solve issues arising from development and competition, and prudently make its ruling taking into account China-EU trade as a whole,"he says.

Chen says the root of the dispute with the EU was the debt crisis and cuts to government subsidies for solar energy use in Europe.

Chinese solar panel makers are big importers of solar equipment not only from the EU but the US as well, and the dispute is hurting US companies, too.

More than 90 percent of Chinese solar products are exported, 70 percent to the EU and 10 percent to the US, the Commerce Ministry says.

Mei Xinyu, a researcher at the International Trade and Economic Cooperation Institute of the Ministry of Commerce, says: "We need to cultivate and expand our domestic market quickly and help Chinese solar makers explore export markets other than the EU and the US. Direct investment should be encouraged for Chinese makers to set up power stations in the EU and the US to use products made in China."

The central government has called for green industries to be promoted, and in December announced a series of measures to boost the struggling solar industry.

Solar photovoltaic demand worldwide will increase from 29 GW to 31 GW this year, up 7 percent on last year, and, for the first time, China will outstrip Germany to become the leading PV consumer, says Marketbuzz 2013, issued in a March 11 report by NPD Solarbuzz, which does research and analysis of the solar market.

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(China Daily 04/05/2013 page21)