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Ok, let's do a sports analogy on this.

The Germans have a hard time beating the Chinese in table tennis. The explanation for this is that the Chinese cheat by having more talent or have worked harder or whatever and the Germans don't think it is fair, so they want to put weight on them to make them move slower to even the odds. Or they if agree to not move at all they can be relieved of the weights. Suddendly the whole sport of table tennis loses its attraction and thus a lot of total income, talent and other values that move to other sports.

It ain't that easy. Each of us know that the Chi have been selling roughly 20% below all-in cost for a while now. They were able to do this because of easy access to finance despite continuos wrecking of balance sheets. Unfortunately for the western PV companies they do not hold a chance in this situation because they don't have easy access to finance but also because their cost is higher. So the EU is faced with a tricky task: raise the price level to allow fair competition (i.e. to Chi all-in cost level of COGS+OPEX+INT) but not beyond that so that the europeans don't get an unfair advantage.

I think the idea of minimum price deserves some thought. It would be way more elegant than establishing tariffs. Issue would be to determine the right level. But if they say minimum is $0.75/W which is roughly all-in cost of Chi solar it could be a viable temporary politically correct solution.

All imvho of course

I don't think the Chinese have sold more below their module cost than anyone else has. A glut of products exist, yes produced in China, but caused by US and Europe dumping manufacturing equipment on China and low production cost caused by US, Europe and Korea dumping poly on China. This caused a glut of products being available at these low prices on an above cash production cost basis. Rules of market forces the prices to a point of supply and demand balance and all market participants simply obide by the prevailing market price. There is no dumping. There is overcapacity and glut, yes. It is in China, yes. How did it get there?

There's too little perspective here. Without poly and manufacturing equipment China would never have this volume output. US, Europe and Korea has a direct cause.

If the Chinese bank lending and the solar companies were allowed to play with the same free market rules the western world does, 99% of them would be bankrupt by now and the solar overcapacity would be a thing of the past. So I agree with Klothilde here. The Europeans have a darn good reason to want to penalize the Chinese, especially considering that it is because of Europe and Europe alone that Solar is what it is today. They have spent insane amount of money (trillions) that dwarfs what any other nation had spend. And most of that money has gone to China. However tariffs is not the best way to go forward, especially with unemployment in Europe at 25-30% and solar installs still one of the bright spots of the economy. Price fixing to a minimum price maybe a near term solution but to tell you the truth it is an ugly idea as well. I much more prefer a similar situation of the oil cartel among different countries where capacity is strictly controlled to a percentage for each country. Maybe that way if the Chinese want to increase capacity they would do it in another country.

Any choice other than free market is going to be ugly, but so is ugly financing bankrupt chinese companies like STP and LDK and prolonging this massive overcapacity.

you seem to have a unique definition of dumping.

And you ignore my point: Overcapacity affects all the companies alike. The Chinese companies are in a unique situation, because they have enjoyed easy finance and they were able to sell at 20% below all-in cost and burn a lot of cash while maintaining liquidity. Go to the 20-Fs to see how they have bleeded. The western companies to the contrary have not enjoyed this easy finance and therefore have gotten into trouble much earlier. In the end it's all about liquidity. Who lives on to see another day? And there the playing field has not been level.

Now this survival help in the form of credit or bailout is not unknown in the west (AIG, Airbus, etc.), however if you have the disparity across a whole sector government needs to step in to level the playing field.

Chinese debt was not free, just stupid, i.e. does not reflect normal bank risk management. Debt was used to buy manufacturing equipment and poly from U.S. and EU.

Yes I used "dumping" concept freely just as U.S. and EU has done. Dumping is when you sell below at what you sell at home market.

The conspiracy theory that Chinese banks, dictated by the Chinese central government, are supporting dumping tactics of the Chinese panel makers sounds like a fabric of Frankie boys mind (the just helped them import goods from U.S. and EU). What's weird is that U.S. and EU claim China is dumping.

The US hasn't just claimed dumping but also proven it and convicted the chinese companies. Let's see what the EU concludes.

Of course the generous financing is politically motivated. Without a political mandate the banks would have cut financing ages ago. Your idea of chinese banks making stupid mistakes is just hilarious. These guys have the best risk management in the world and would never put a yuan in a company with a wrecked balance sheet and cash-burning operations.

As a side note, this irrational lending was also a tremendous destruction of shareholder value. Now you have companies with a drop of equity in a sea of debt and who have a debt burden of up to 5-7 cts/watt. This is a tremendous competitive DISadvantage for the next wave of battles against LG, Samsung, Foxconn, etc. Chances are, the companies will need significant equity infusions or debt-to-equity swaps in order to bring down those costs. And we all know what that means: Current shareholders are going to end up like fried chicken.

U.S. decision was solely a political decision in the election year that's it. That's why they left a loophole for Chinese to avoid paying tariffs.

http://ia.ita.doc.gov/download/factsheet…ls-20121010.pdf

Quoted from "Klothilde"

Your idea of chinese banks making stupid mistakes is just hilarious. These guys have the best risk management in the world and would never put a yuan in a company with a wrecked balance sheet and cash-burning operations.

Sounds contradictory. Supporting LDK's expansion at super high leverage was a stupid mistake in retrospect. It's turning into a local cluster-F in Xinyu. I'm saying the Chinese banks didn't perform at their normal standard here, which is low risk. They were not alone in not foreseeing the epic crash of the industry though and the exceptional expansion support (not loss carrying support) was according to the focus area of the 5-year plan. China not being recognized as a market economy makes it an easy target for dumping allegations. You may not like the formation of the Chinese PV industry, but that does not mean Chinese panel makers have conducted dumping. If the leading Chinese panel maker STP didn't have to sell at these low prices, but was executing a dumping strategy it does not seem like a good one since then they dumped themselves into bankruptcy.

Quoted from "explo"

Quoted from "Klothilde"

Your idea of chinese banks making stupid mistakes is just hilarious. These guys have the best risk management in the world and would never put a yuan in a company with a wrecked balance sheet and cash-burning operations.

Sounds contradictory. Supporting LDK's expansion at super high leverage was a stupid mistake in retrospect. It's turning into a local cluster-F in Xinyu. I'm saying the Chinese banks didn't perform at their normal standard here, which is low risk. They were not alone in not foreseeing the epic crash of the industry though and the exceptional expansion support (not loss carrying support) was according to the focus area of the 5-year plan. China not being recognized as a market economy makes it an easy target for dumping allegations. You may not like the formation of the Chinese PV industry, but that does not mean Chinese panel makers have conducted dumping. If the leading Chinese panel maker STP didn't have to sell at these low prices, but was executing a dumping strategy it does not seem like a good one since then they dumped themselves into bankruptcy.

A lot of bank's decisions are driving by higher level government policy. Like to develop PV industry in next 5 year plan and they have to lend out certain money to show they are following the big plan.

It is quite a different thing to provide financing at the onset, say 5 years ago, to a promising industry, than to keep providing continuous financing during the last 8 quarters where the metrics of all companies were catastrophic. All these loans of the last quarters were politically motivated. No bank in their right mind would have financed Chi companies voluntarily during this time with their high leverage and deep losses.

But you'll be surprised: I actually think it's terrific that China shows such strong support for this futuristic industry. The country just needs to take into consideration that other countries with PV industry may take political action to establish a level playing field. Good news is that apart from the EU there won't be many more markets likely to establish tariffs (apart from India and Japan maybe).

India does not have PV production industry developed. What India is going to protect with tariff?

They do have a dozen or so of small manufacturers

Well China does go by a different set of rules they established before joining the WTO.

A different set from everyone else.

I don't believe the EU thinks at all like the US. They want to build renewables, it's in their best interest to bargain but keep the industry growing at the same time. Compromise will Happen