By Kevin Allison and Christopher Swann, Reuters Breakingviews
FORTUNE -- A trade war is brewing over solar panels but the casus belli looks shaky. Western manufacturers probably exaggerate the impact of cheap Chinese kit on the industry's health. Panel profits need to rise, but punitive tariffs and possible Chinese retaliation may just make solar energy less competitive.
Europe's top trade official said earlier this week there were no coordinated talks with the United States to negotiate an end to a trade dispute with China over alleged dumping of solar panels into their respective markets. The EU has until June 5 to decide whether to follow the U.S. by levying punitive tariffs on Chinese panel imports. Trade commissioner Karel de Gucht is said to be mulling duties of more than 40% on Chinese panels, which European manufacturers say account for 80% of European panel sales. The U.S. slapped similarly steep tariffs on Chinese solar panels last year.
China, meanwhile, threatens duties on polysilicon, the raw material for the panels and a market still dominated by Western manufacturers.
There's no question that panel-makers are suffering. Three years ago, panel makers' gross margins were 30%, according to IHS, a consultancy. By the end of last year, unable to maintain pricing power because of rampant overcapacity, they were selling their products at a loss. And there is little doubt that cheap credit and other inducements from Beijing have made it easier for Chinese manufacturers to withstand the pressure. They have seized the opportunity to grab market share.
However, the story is more complicated. To start, falling production costs account for most of the 80% price decline since the beginning of 2010. Losses, and government support, are typical in industries in the midst of rapid technological innovation.
Also, Western panel-makers are hardly pure when it comes to relying on the government. Without generous subsidies to promote solar power, they would probably not exist at all. In the industry's 30-year history, gross margins on solar panels have only been above 5 percent in the years 2004-2008, according Paula Mints, a solar market analyst.
An unprofitable industry is undesirable. But punitive duties only push up everyone's costs. That would not serve anyone, since panel-makers' pain has helped support a boom in solar demand. Subsidies have only accelerated the trend. Thanks to falling costs along the whole value chain, even subsidy-free solar is already competitive with fossil fuels in some niche markets, and broader cost-competitiveness seems within reach.
Policymakers should remember that, as long as the lights come on, most people don't really care where their power comes from. Coal, oil, gas, and rival green energy sources would be the real winners from a solar trade war.
The news that consumer spending growth is slowing in China isn't all bad. Just ask Burberry.
FORTUNE – Plenty of people were expecting an end to the China-led luxury boom last year, but as Burberry's latest sales report suggests, China's consumers are more resilient than many of us think.
On Wednesday, the British fashion house reported better-than-expected sales, thanks largely to strong demand in China and Hong Kong for handbags and the MORENin-Hai Tseng, Writer - Apr 18, 2013 5:00 AM ET
Gold is usually a safe haven for investors during times of economic turmoil. Not this time around. And Wall Street expects it to get worse.
FORTUNE – As gold plunges to new two-year lows, a paradox has emerged: The decline reflects better news in the U.S. economy, but it also suggests bad news in other parts of the world as bullion loses its luster as a safe-haven investment.
After rising for 11 MORENin-Hai Tseng, Writer - Apr 16, 2013 5:00 AM ET
China is sliding further along the scale of chaotic financial systems, but is not yet in the danger zone.
By John Foley, Reuters Breakingviews
FORTUNE -- Will China have a financial crisis? And if so, would Chinese people be any worse off? The answers are not found in the country's rapidly rising levels of debt, but in the potential for chaos when things go wrong. China is sliding further along the MOREApr 9, 2013 10:39 AM ET
Lending has soared in China during the first months of this year. Arithmetic suggests it can't last.
By John Foley, Reuters Breakingviews
FORTUNE -- China began 2013 with the same old economic model. Growth for the first two months of the year was driven mainly by exports and real estate. The increase in construction appears to have been fueled by credit. The current trajectory can continue only by pumping ever more MOREMar 13, 2013 5:00 AM ET
The majority of China's new leaders grew up during the Cultural Revolution, laboring in factories and the poverty-stricken rural regions, so they have a deeper understanding of those who have been left behind during the country's economic boom.
By Wenguang Huang
FORTUNE -- A no-frills parliamentary session is just one of the palpable changes under China's new Communist Party leadership, which tries to project its "plain-speaking and pro-people" image.
In a move MOREMar 7, 2013 11:56 AM ET
China's gender imbalance may have contributed as much as 2% to its annual GDP growth. Can it continue?
FORTUNE -- They say a good man is hard to find, but that's not the case in China, where men overwhelmingly outnumber women. The ratio of men of marriageable/dating age (15-30 years old) to every woman is 1.15 -- an unusual imbalance that's created a rat race of bachelors vying for the affections MORENin-Hai Tseng, Writer - Feb 15, 2013 11:26 AM ET
Regulatory dispute stops Chinese companies from completing U.S. IPOs.
FORTUNE -- Chinese online advertising platform AdChina last year filed to go public on the Nasdaq, after having raised more than $30 million in venture capital funding. Yesterday, however, the company acknowledged that it won't have an IPO celebration at Nasdaq or any other U.S. exchange. Not because of investor interest or company scandal, but rather because of an ongoing battle between MOREDan Primack - Feb 12, 2013 10:43 AM ET
Growth rates in India and the other large emerging economies are unlikely to stage a comeback this decade, argues a new book by Morgan Stanley's emerging markets equity head.Feb 12, 2013 10:18 AM ET
AIG's former subsidiary, AIA, helped save the company. Now it could be a competitor.
By Neel Chowdhury, contributor
FORTUNE -- Insurance giant AIG has always enjoyed a special relationship with AIA, its former Asian subsidiary. After all, AIG was founded in Shanghai in 1919 by C.V. Starr, an adventurous Californian who pioneered life insurance in Asia. AIG (AIG) left China in 1950, one year after Mao's communist takeover, but AIA remained MOREJan 9, 2013 5:00 AM ET
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