Solar Panel Maker Suntech Forced Into Bankruptcy

Lack of demand from a weak global economy is partly to blame for Suntech's troubles. But China's state-driven model of capitalism is sparking overproduction, analysts say, and several Chinese solar companies are fighting for survival.

Copyright © 2013 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

STEVE INSKEEP, HOST:

Not long ago, it seemed that China was on its way to owning the solar energy business. China was making solar panels far more cheaply than U.S. companies. Now, things look a little more complicated. China's Suntech was forced into bankruptcy yesterday. It's one of the world's largest solar panel makers. Suntech has to reorganize after defaulting on a bond payment of more than half a billion dollars.

Its fall reflects problems in China's approach to the global solar industry. NPR's Frank Langfitt reports.

FRANK LANGFITT, BYLINE: A few years back, President Obama praised China's approach to green energy. Here's how he put it, in his State of the Union address in 2009.

(SOUNDBITE OF ARCHIVED STATE OF THE UNION ADDRESS)

PRESIDENT BARACK OBAMA: We know the country that harnesses the power of clean, renewable energy will lead the 21st century. And yet it is China that has launched the largest effort in history to make their economy energy efficient.

LANGFITT: That effort doesn't look quite so impressive today. In fairness, some of Suntech's troubles are due to a lack of demand from a weak global economy. But analysts here also blame China's state-driven model of capitalism. It's a system that rewards local growth and can spark overproduction. Gary Liu is an international finance specialist at the China Europe International Business School here, in Shanghai. He says local officials...

GARY LIU: (Through translator) Local governments are the real trouble-makers here.

LANGFITT: Liu says local officials have pushed solar energy to meet national growth and environmental goals, even though the market isn't yet big enough to support it.

LIU: (Through translator) So the local governments feel they need to do something, as kind of their political performance - and solar industry can create big GDP. Without the encouragement and the subsidy from the local government, there wouldn't be so much investment in this industry.

LANGFITT: Chinese companies have pushed some foreign competitors out of business. Now, a number of Chinese firms are fighting for their own survival.Patrick Chovanec sees more trouble ahead. He's chief strategist at Silvercrest Asset Management, in Beijing. [POST-BROADCAST CORRECTION: Chovanec works in New York.]

PATRICK CHOVANEC: There are several Chinese solar companies that are in a great deal of financial difficulty. There was a senior official in China's central government who, a few months ago, said that two-thirds of China's solar companies need to go out of business in order to make the industry viable. The problem, though, is which one?

LANGFITT: In long the run, Gary Liu remains optimistic about China's solar business. But for the industry to succeed, more companies will probably have to follow the path of Suntech.

Frank Langfitt NPR News, Shanghai.

Copyright © 2013 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Correction March 22, 2013

The audio for this story gives an incorrect work location for Patrick Chovanec, of Silvercrest Asset Management. He is based in New York.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

Support comes from: