Chinese Dominance in Solar Energy

At the beginning of 21st century, the need for change in everyday lifestyle and industrial production has created a space for the development of technologies that will sufficiently serve humanity but that will be environmentally friendly. In this sense, we witnessed an expansion of products that supported sustainable energy such as solar panels, wind turbines, and eco-fuels that have become popular products all over the world. Naturally, in the world after the end of the Cold War, the USA had a monopoly over these trade areas. Companies such as First Solar and Sunpower have dominated the market when German and Japanese companies joined the race(Awatea, Ajith, & Ajwani-Ramchandani, 2018, str. 181).                

In the most recent times, the evident expansion of the Chinese dominance in economy and technology, present throughout in the trade war with the USA, has transcended into the sphere of renewable energy where Chinese company JinkoSolar holds the number one position in manufacturing. Because this topic has somehow stayed in the shadow of more popular conflict and competition in the sphere of technology, solar power, and production of solar panels have not been noted as a possible feature of expansion tactic China has been implementing. Therefore my research question is related to the factors that created the ground for Chinese companies to dominate the solar panel market. The arguments used in the paper include several instances correlated with the influence that the Chinese government had in special policies to assure companies’ competitiveness, their overall economic strategy, domestic factors that pushed the development of this field, and ideological standpoint for governmental support. In the end, I conclude with the claim that the Chinese strategy can have significance in the dominance of the European market in the same way it dominates the South Asian region.

From rural-oriented solar programs to world champion

Before the 1990s, the Chinese companies have not been very active in solar power industry. Because of the shift in world agenda and the excessive need for the affordable workforce and technology in this area, China started to develop industrial capacities for it. When it comes to the beginnings of Chinese involvement in solar power, the primary focus was the know-how and skilled labour that was sent to other countries. This eventually resulted in China starting companies that deal with solar power and inviting others to move to China, where they could found cheap, skilled labour but instead of paying taxes, they received tax credits. This, combined with expertise gained in the work of German companies in this field helped the growing trend of Chinese enterprises, and soon the production of solar panels exceeded the demand of the domestic solar power market. Today in the top 10 of the companies that deal with solar panels and solar energy, there are 4 Chinese companies, among which the first place is held by Chinese JinkoSolar Holding Co. Ltd. Several factors can be distinguished which impacted this dominance in solar energy industry. Besides the demand created by other countries and their extensive search for cheaper alternatives to the USA monopoly in this area, the Chinese developing economy found the reasons to create a more beneficial domestic atmosphere for the development of solar power and green energy. Overall narratives in world affairs that started to focus more on climate change and renewable energy resulted in several international agreements extensively supported by most states. This was recognized by China, which was at the same time starting to reshape its international position and to build preconditions for becoming the global hegemon. Under the last two Chinese “5 year-plan“,a strategical need was created by the local governments from rural and underdeveloped areas to create solar power manufacturing facilities precisely since they had space and labour force to develop this industry.    

These kinds of trade incentives can be connected to another factor that influenced the development of the solar power sector – domestic pollution. The 11th Five-Year Plan (2006-2010) aimed to increase the consumption of renewable energy sources on the domestic market to fight this problem and to point out the quality of Chinese companies and the countries progress in environmental protection. Total investment in treating environmental pollution increased by 15% annually and environmental investment reached 1.33% of the GDP by 2009, which further continued in the 12th plan resulting in government establishing a credit rating system for enterprises’ environmental behaviours, building a green rating system in banks, and exploring mechanisms for earmarked funds for national ecological compensation. As a result, the Chinese domestic market has been growing consistently ever since (Zhang & He, 2013) which also impacted the changing of the image of China has as a polluted country. The factor that also influences the growing solar power manufacturing industry of China and its dominance in the world is the momentum in which the revolution happened – the 2008 economic crisis when the Chinese government recognized the growing need for sustainable technology and its development, and which it supported by extensive policies(Awatea, Ajith, & Ajwani-Ramchandani, 2018)that helped preserve these companies on the market. Talking about the norms that the Chinese government implemented, the reasoning behind them could be seen as the combination of economic benefits as well as political ones.Thanks to the recognition of the Chinese Communist Party, solar power companies such as JinkoSolar become one of the most valued corporations that exported Chinese solar power products. Here lies the most important factor that pushed Chinese companies to dominate – governmental involvement and policy push for the companies to be more competitive and which save them from the economic crisis.

These policies have been deemed problematic by the European Union and the USA for several years, which eventually lead to the dispute that was resolved in 2013. Chinese government instituted several consumption policies to increase competitiveness with the USA manufacturers and to expand over the domestic market. Policies such as feed-in-tariffs, renewable portfolio standards, large scale solar power generation projects, easier grid connection, and set targets for cumulative installed capacity(Zhang & He, 2013) created problems for the EU firms to be competitive against the Chinese ones which lead to imposed tariffs terminated by mentioned dispute settlement. Even though tariffs were imposed, China managed to surpass the German production by 2015 as well as the USA`s because of its enormous capacities and a developed market for its products. China become the leader in the trade of solar energy and in establishing its technology all over the world, while managing to become pioneer in patents related to solar power(Awatea, Ajith, & Ajwani-Ramchandani, 2018, str. 184-185).

Chinese dominance in the field of renewable energy come at the same time as the USA withdrawal from the Paris Climate Agreement. This opened up new opportunity for China to become more engaged in the policies related to environment within international organizations and become a way of a „posterboy “for others to see. This comes as no surprise because green policies have a big say in developing countries in Africa or member state of the European Union which is precisely where China is trying to expand its presence. On the other note JinkoSolar and other corporations have created some controversy on being highly involved with the Chinese Government which slowed their progress in these regions, but then again not in the same volumeas in the case of Huawei in IT sector. Meanwhile, Chinese strategy behind it may be the same – spreading its presence and creating soft power.

In line with this, the factor that explains the impact of China is related to alignment of its policies on production as well as target areas with the European Union and their Green New Deal. A couple of years ago, as mentioned, the European Union had a series of tariffs set for China due to state policies that make the Chinese solar panels more competitive on the market, but as time passes it is more than evident that JinkoSolar and similar companies dominates this area both in innovation and outreach, leaving behind the US and German companies. These tariffs have been lifted due to more beneficial products that China had to offer in this field, which can help the EU`s new target in renewable energy. This is more than expected having in mind that China supplies more than 50% of South Asian countries’ needs, and was already at around 20% of supplying European market in 2014 which is by now more than two times multiplied.

 Even though the Green Deal itself focuses more on wind energy which is pioneered in the EU member states, China has more impact the solar power area since it has better competitiveness rate due to low prices and low greenhouse gas emissions. Taking a look at a specific company heavily subsidized by the Chinese government as JinkoSolar, their presence in Europe has been seen extensive which reflects on the overall presence of China in the European market in several fields. Argument for this is the fact that JinkoSolar has a lead the biggest up-to-date renewable energy project -the Kozani project built in Greece which is interpreted as a „benchmark“for green energy in Europe. In essence quality of the production has not been put in question due to several world-famous projects completed by the firm which speak for its quality such as the plant Noor Abu Dhabi which will be the largest in the world when completed.

This kind of economic influence in trade and manufacturing can be compared to the impact that Chinese production of toys had at the beginning of the century and which is significantly correlated to the soft power China. As presented in Xi Jinping „ Chinese dream“speech, China has a tendency to spread its influence in international arena for several decades now. We have been aware that Chinese dominance in the South Asian region is not challenged but to fulfil its aspirations, the influence must be spread in both Africa and Europe and it must transcend into the soft power more than in economic one. The Green New Deal and overall increasing significance of green economy and renewable energy can be used as a part of Chinese tactics. Together with this, the engagement of the government in the economy and private corporations can have an immense impact on the future position of China as a great power.                    

What is left to conclude is that in the essence of the Chinese presence and dominance over solar power production and solar panel manufacturing lays a combination of factors. Solar power and renewable energy have had a peak in the years after the 2000s which China saw as an economic opportunity where it could invest and develop the industry based on domestic resources. Because manufacturing soon satisfied domestic incentives, and the global popularity of these products hit its peak, China started to export its knowledge as well as products on the global market, soon becoming absolute dominant over the Asian region. Having the quality but also seeing that the window of opportunity opened, China used its chance to propagate its production once again.   

As an addition, this period of development of green energy and its industry overlaps with the shift China had in its policy towards the world and its intention to become a new global superpower, especially in the aftermath of the 2008 economic crisis. Politically, China has started to be involved in different international agreements connected to the environment which together with the USA withdrawal from the Paris Climate Agreement and the European fight for Green New Deal can be interpreted as the set of fortunate events presenting China as pioneer in environmentally friendly future. All this was seen in a set of policies and subsidies created by the Chinese government to support companies such as JinkoSolar which is only one of multiple examples of successful solar power companies originating from China, while also it presents an example how governmental interests can have a significant say in economic sphere. This may be used as an opportunity to spread both economic and soft power. The attitude of the Chinese government in this sphere may be interpreted as one of the tactics to spread the idea of Chinese world hegemony in Europe, now that the USA has weakened its position. JinkoSolar and its success is a product of the mentioned factors, but moreover the product of aspiration of Chinese Government that managed to put this industry into their framework set for the future.

Mina Medjedovic
Mina Medjedovic
Mina Medjedovic is a young researcher with a BSc in International relations and who is currently in the Master's program in the same field at the Corvinus University of Budapest. She is focusing on China and its foreign policy as well as the European Union and Western Balkan integration.