China's Solar Industry Faces Market Reset Amid Oversupply

China’s solar industry is undergoing a significant correction, reminiscent of the 2018 “China-531” policy, which caused a major disruption after the government cut subsidies.

That event led to a 20 percent drop in silicon module prices, 52 percent in solar cells, and 30 percent in polysilicon, reducing installations from 53 GW in 2017 to 30–40 GW in 2018. The current situation mirrors these historical boom-bust cycles where policy shifts trigger oversupply, causing price collapses and forcing market consolidation. China’s solar manufacturing structure—driven by capacity expansion and state guidance—has historically produced more panels than demanded, often offloading excess inventory in global markets, impacting international solar pricing.

Key Highlights

• China's solar industry faces a correction similar to the 2018 “China-531” policy.
• Oversupply and price drops are driving consolidation and market-based reforms.
• China is projected to contribute over 50 percent of global renewable capacity by 2030.

Now, China is transitioning from subsidy-driven growth to market-based competition. Encouragingly, solar power has reached grid parity in all 344 surveyed Chinese cities, with 22 percent already generating solar electricity cheaper than coal.

The Ministry of Industry and Information Technology (MIIT) is guiding the industry toward sustainability by focusing on compliance, quality enhancement, and the exit of outdated production capacity. According to Goldman Sachs, high-cost producers may begin exiting the market by 2025, with full clearance by 2026.

Also Read: Peak Energy Buys Solar Projects in Japan for Expansion

As Chinese firms seek international markets to absorb surplus capacity, their pricing power continues to disrupt global solar competition, prompting nations like the United States to implement tariffs and incentives to shield local manufacturers.

Despite current setbacks, China’s solar sector remains dominant, with projections showing it will contribute over 50 percent of global renewable installations by 2030.