China’s green energy power is undermining Germany’s solar industry

In China, green energy is booming. Their wind turbines, electric cars and solar panels dominate the global market, deeply worrying German industry as Chancellor Olaf Scholz prepares his second official trip to China.

China’s green energy industry now has global dominance. In Germany, a report (link in English) from the Institute for the World Economy in Kiel on Chinese subsidies in the green economy is causing a lot of noise. Beijing’s investments in solar panels would have killed global competition, particularly German competition.

Chinese excess

To find a symbol of Chinese domination, just go to sea, off the coast of Fujian province, in the Taiwan Strait, to see the world’s largest wind turbine, which was commissioned in 2023, with a capacity of 16 megawatts. China is now the world leader in off-shore wind power and the situation is identical for onshore wind turbines. In the 2023 global wind turbine manufacturer rankings, four of the top five companies are Chinese. Also in 2023, the country has installed more solar panels worldwide than the United States has in its entire history.

To race in the lead, China first relied on its immense territory which gives manufacturers almost infinite possibilities. In the great deserts of northern China, the landscape is now made up of solar panels as far as the eye can see.

All this is obviously encouraged by a particularly incentive policy on the part of the Chinese authorities, who have encouraged and supported the development of green energies. Which means that today, China is flooding not only its own market, but also the world market, with its wind turbines and even its solar panels, sold at particularly attractive prices.

Europeans and Americans criticize China for having subsidized this sector too much, to the point of distorting market rules. Beijing does not deny having subsidized this industry, but so do other countries. For example, Australia announced on April 11 a vast plan with public funds to support green energies.

In the case of China, what the Europeans say in particular is that the subsidies have been massive, with facilities to build the factories and support in particular from the Chinese provinces and municipalities. China does not deny, but denounces the protectionist tendencies of the European Union and highlights its absolute priority, continuing to develop green energies, to fight against climate change.

Report on Chinese subsidies causes controversy in Germany

As Olaf Scholz prepares a four-day stay in China, starting April 13, this report from the Institute for the World Economy in Kiel shows Germany’s dependence on China. However, two years ago, the German Chancellor strongly encouraged German companies not to put all their eggs in one Chinese basket.

This strategy is a failure, since Germany’s dependence on China has not decreased, it has even increased, particularly in green technologies. China has, in fact, embarked on the ecological transformation of its heavy industry and this will be one of the points of tension during the planned discussions between Xi Jinping and Olaf Scholz. Two thirds of German companies established in China complain of unfair competition, because of the subsidies allocated by China to its own companies. According to estimates, they are three to nine times higher than those practiced in Europe.

This policy of national preference has devastating effects even in Germany, in the solar industry, the last vestiges of which are disappearing. The Meyer Burger company, and its 500 employees, a firm based in Saxony, has just closed its doors, a victim of Chinese competition which produces at a loss in order to flood the world market. His boss denounced, in the media, the lack of support from the German government and the risk of 100% dependence on Chinese solar power, nothing happened. The world’s second largest economy is banking on green growth and aiming for unrivaled dominance in solar panels, of which it produces 80% of the basic component, silicon.

Europe is not completely helpless, since the authors of the Kiel Institute report recommend entering into negotiations with Beijing after the launch by Brussels of an anti-subsidy investigation into Chinese electric cars. This would involve persuading China to withdraw the most harmful subsidies to the EU and taking into account Beijing’s economic difficulties, its dependence on the European market and tensions with the United States. A window of opportunity exists and the Chancellor’s trip could help open it.