China warns overheated solar industry to cool competition, curb backlash

China is cautioning its overly saturated photovoltaic sector to avoid blindly expanding capacity, particularly in solar panel production.

This warning comes with newly issued guidance as the country faces self-defeating industrial overcapacity, which has led to domestic inefficiencies, triggered global backlash, and fueled geopolitical tensions, Caliber.Az reports citing foreign media.

After months of gathering public feedback, the Ministry of Industry and Information Technology (MIIT) released updated versions of two key industry documents on Wednesday. These revisions urge manufacturers—without mandating them—to scale back projects aimed solely at increasing capacity.

Additionally, the ministry raised the minimum capital requirement for new solar manufacturing projects to 30 per cent, up from 20 per cent. This move is intended to ensure that such projects are financially viable and sustainable, while also adding value in an already highly competitive market.

The new guidance encourages solar producers to focus on technological innovation, improving product quality, and reducing production costs.

"This sends a signal to companies to avoid blindly pursuing scale and to expand production cautiously," said Jiang Hua of the China Photovoltaic Industry Association (CPIA).

While the guidance is not mandatory, analysts suggest that companies complying with the new criteria are likely to receive more policy support, which could help eliminate inefficient capacity and promote healthier growth in the sector.

By Vafa Guliyeva