Chinese banks try to unwind all that bad solar debt

The most amazing figure in today’s New York Times article about how the massive credit extended to solar PV panel makers by Chinese government banks isn’t panning out is the figure that says that Chinese solar companies have enough capacity to produce 50 gigawatts of solar this year. If the “50 gigawatt” figure rings a bell, that might be because earlier in the spring China upped its 2020 installed solar target to 50 gigawatts.

So for you students of supply and demand, Chinese solar manufacturers could produce all of the solar panels needed for a goal that’s supposed to take 8-9 years in just one year. That’s, uh, that’s an overcapacity problem.

And the kicker is that the goal was 25 gigawatts but was doubled, partially because the government is so concerned that the massive credit it gave its solar makers is producing a glut of panels that will need to be absorbed by the domestic market. That’s even more true now that the U.S. has imposed anti dumping tariffs and looming tariffs in the EU could add additional strain.

Beneath all this is the reality that extending $18 billion in low-rate loans to companies that weren’t all that credit worthy carried some nasty risk. And the real question for me in all this has always been how the Chinese banking system functions when the state gives big loans to companies that can’t always repay them. Do the banks just write off these bad loans, and wait for the central government to print more money?

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Adam Lesser

Analyst Gigaom Research

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