Abstract
In July 2013 the European Union (EU) imposed restrictions on Chinese solar photovoltaic (PV) manufacturers, looking to exporting to the EU. In this paper, we consider the impact of this trade barrier, using a sample of 454 stock-listed PV producing firms. We find that the trade barrier erased US$ 8,19 million off the value of the average European PV manufacturers and US$ 247.03 million off the value of the average Chinese PV manufacturers. We also find that while the trade barrier reduced the willingness of the industry to reorganise, it stimulates Chinese manufacturers to reorganise both their domestic and their international operations. The latter, we warn, is likely an attempt by Chinese manufacturers to ‘tariff jump’. We conclude, therefore, that the trade barrier was both inefficient, in that it both hurt the companies it aimed to protect, and ineffective, as those it sought to punish may have circumvented it.
Highlights
The Chinese solar photovoltaic (PV) industry has exploded in recent years
That the trade barrier led to a widespread destruction of value: the trade barrier wiped US$ 8.19 million off the value of the average European solar-panel producing firm – possibly due to the fact that, at €0.56/Wp, the barrier did not offer European manufacturers sufficient protection – and erased US$ 247.03 million off the value of the average Chinese producer – probably due to the extra cost that the barrier implied
As European firms appear to have struggled, we report that Chinese firms reorganised operations, potentially in an effort to circumvent the trade barrier
Summary
The Chinese solar photovoltaic (PV) industry has exploded in recent years. Chinese firms produced 3 MW (mega-watts) in 2000, and 10,852 MW in 2010 (Algieri et al, 2011), but between 2009 and 2014, the industry again quadrupled in size. The Chinese Government has played an important role in the growth of this industry. It has, for example, heavily invested in public R & D spending, but it heavily subsidised Chinese PV manufacturers (Lacey, 2011).. It has enabled Chinese producers to survive where others would not; Haley and Haley (2013) report that the six biggest Chinese producers had debt ratios of over 80% in 2012, and conclude that without government support, all would have gone bankrupt. The subsidy has enabled Chinese producers to produce cheaper products: Chinese products retail at €0.47/Wp (watt-peak), compared to the European average of €1.10/Wp.
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