Cheap, abundant Chinese solar panels have become essential to decarbonizing the global energy system. Without them, the global transition to clean energy would likely have been slower and more expensive. But China’s solar industry is now facing a bizarre problem: oversupply. Chinese solar manufacturers have built up far more production capacity than the market can accommodate. In fact, China now has enough factories to meet about twice the global demand for solar products, according to an analysis by research firm Rhodium Group. If all of the newly announced factories are built, the country’s production capacity could double, further widening the gap between supply and demand.
The market imbalance has put Chinese solar module manufacturers in a precarious position. Market analysts and company executives say the industry’s central problem – a massive oversupply of panels – has sparked fierce “price wars” between rival companies and sent prices plummeting. In the first quarter of 2026, the country’s solar manufacturers reported losses of $1.5 billion, extending about three years of continuous unprofitability. Industry giants such as JinkoSolar and Longi have also faced slower installations in China, trade barriers in the US and weaker global demand.
“There have been huge price wars internally in China where companies have simply reduced prices to very, very low levels,” said Hannah Pitt, head of energy and climate at Rhodium Group.
Chinese officials have tried for years to curb cutthroat competition, curb overproduction and stabilize prices, without success. Prices continued to fall for all but the most advanced solar products and companies continued to build new systems. Regional governments that have invested heavily in solar supply chains have been reluctant to restrict local development. According to a report by the South China Morning Post, some manufacturers even built illegal factories or produced panels without permits.
“Everyone is wondering how long this can last,” said Martin Schachinger, a Germany-based wholesaler of solar products. “Even TaleSun, a manufacturer that we expected to disappear from the market five years ago, still exists. So it’s a little… scary.”
China declared solar energy a strategic industry in 2010, leading to massive public investment. Local governments subsidized manufacturers while private investors expanded each stage of the supply chain in anticipation of booming global demand. The resulting manufacturing ecosystem enabled Chinese companies to produce extremely affordable solar panels for the domestic and international markets.
But production soon exceeded global demand, sparking a bitter battle as manufacturers cut prices to attract 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. Involution is a common trend in Chinese industries that receive strong public support, including other clean energy sectors such as batteries and electric vehicles.
For the United States and the rest of the world, oversupply meant a constant availability of cheap solar panels and components that encouraged the use of renewable energy. Solar panels produced more electricity than coal in the United States in May for the first time on record, according to an analysis of government data by Ember, an energy think tank. Globally, clean energy sources, of which solar is the fastest growing, will meet all of the world’s new electricity demand in 2025, preventing a surge in fossil fuel power generation. It has helped China, the world’s largest net emitter of Greenhouse gasesemissions growth will also flatten. The country’s emissions appear to have plateaued and could soon peak.
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If Chinese officials fix the oversupply problem, it could blunt some of the rapid solar deployment. But experts say China is more focused on developing its solar industry than right-sizing it, meaning cheap solar panel prices could last for years.
Chinese officials called for a “concerted effort” to curb solar production as recently as April. However, the country’s broader industrial policy and stated goals appear to deviate from strict discipline and instead focus on modernizing solar supply chains to produce more advanced technologies, according to a May report from Rhodium Group. In other words, the problem of oversupply is not deterring China from its large investments in solar energy. In fact, its latest five-year plan signals that China will continue to support its vast clean energy industries, including solar, and will “optimize and modernize” those industries rather than curbing their oversupply.
“It’s a really interesting moment for Chinese industry as a whole right now. Instead of just trying to consolidate, Beijing is pushing the industry to go further and move into more advanced manufacturing,” Pitt said.
The strategy stands in stark contrast to the steady growth of solar production in the United States, which relies on market conditions rather than government support. Over the past year, the Trump administration and Congress have weakened policy incentives for solar energy by cutting tax credits expanded in the 2022 Inflation Reduction Act and hampering solar development on federal lands. But the demand for inexpensive solar energy ensures that the industry continues to grow. Unlike China’s self-sufficient solar empire, U.S. producers cannot meet all domestic demand for solar panels and still rely heavily on foreign components, particularly from China. While the US has taken a slower, market-oriented approach, China has opted for a long-term state strategy that prioritizes manufacturing dominance over short-term profits.
This dominance in manufacturing is particularly important as other countries push back against China’s near-monopoly in the industry. The country’s efforts to improve its supply chains and shift to higher-quality products could help it stay ahead as new technologies reshape the solar market and countries seek to build their own competing industries.
“If a solar company in Europe does not enter into a joint venture with Chinese companies and take advantage of the enormous advantages of Chinese systems, it will not be successful,” said Schachinger. “From time to time, Indian manufacturers try to penetrate the European market, but they have no advantages over Chinese products and the prices are higher.”
This means that unless unsustainable business models or geopolitical tensions spoil the boom, the world will have low-cost Chinese solar products available for at least a few more years Decarbonization Goals, experts suspect.
“This isn’t over yet,” Pitt said. “I think the data suggests that prices will remain low for the foreseeable future.”
https://grist.org/energy/chinas-solar-industry-is-losing-money-the-country-is-doubling-down-anyway/
