What's happening with the Chinese solar industry?
The Chinese solar industry is facing an unusual problem: overcapacity. With production capacity sufficient to meet about twice the global demand for solar products, according to analysis by the Rhodium Group research group, China is facing a superproduction crisis. This has led to a price war between companies, resulting in significant losses. In the first quarter of 2026, Chinese solar companies announced losses of $1.5 billion, extending a sequence of about three years of negative financial performance.
Companies like JinkoSolar and Longi are also facing challenges due to the slow installation of solar panels in China, trade barriers in the US, and weaker global demand. The Chinese government has tried to control the fierce competition and stabilize prices, but with little success. Prices continue to fall, and companies continue to build new facilities.
Why does this matter?
The situation of the Chinese solar industry has significant implications for the global energy transition. The availability of cheap and abundant solar panels from China has been essential for the adoption of renewable energy worldwide. Solar energy provided more electricity in the US than coal for the first time in May, according to analysis of government data by the Ember think tank. Globally, clean energy sources, of which solar is the fastest-growing, met all new electricity demand in 2025, avoiding an increase in fossil fuel generation.
However, if the overproduction problem is corrected, this could slow down the deployment of solar energy. But experts say that China is more focused on advancing its solar industry than adjusting it, which means that low solar panel prices may continue for years.
The mechanism behind the problem
Overproduction in the Chinese solar industry is the result of a combination of factors, including heavy government investment and incentives for companies. China designated the solar industry as strategic in 2010, leading to significant public investment. Regional governments subsidized companies, while private investors expanded all stages of the supply chain, anticipating high global demand.
However, production soon exceeded global demand, triggering a fierce battle between companies, which cut prices to win customers. The Chinese government called this self-destructive competition “involution” (neijuan), a term originally coined by Chinese students to describe the relentless pressure to succeed with diminishing returns.
Broad context
The situation of the Chinese solar industry reflects a broader trend in clean energy sectors that receive heavy government support. China has invested heavily in renewable energy technologies, including solar, wind, and hydro, as part of its efforts to reduce greenhouse gas emissions and improve air quality.
However, China's approach to clean energy development has been criticized for being overly dependent on subsidies and government incentives. Some argue that this can lead to a lack of competitiveness and innovation in the sector, as well as create market distortions.
What happens next
Experts believe that China will continue to support its solar industry, despite current challenges. The country's latest five-year plan signals that China will continue to optimize and upgrade its clean energy industries, rather than control overproduction.
This may mean that low solar panel prices will continue for years, which could drive the adoption of renewable energy worldwide. However, there are also risks associated with China's approach, including the possibility of a financial crisis if companies are unable to adapt to changes in the market.
Conclusions and perspectives
The situation of the Chinese solar industry is complex and multifaceted, with significant implications for the global energy transition. While China continues to support its solar industry, it is essential to consider the risks and challenges associated with this approach.
It is crucial that governments and companies work together to create a more sustainable and resilient clean energy market, which can support the growing demand for renewable energy and reduce greenhouse gas emissions.
Source / Reference
This story was originally published by Grist with the title China’s solar industry is losing money. The country is doubling down anyway. on July 29, 2026.