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China offers measured response to US tariffs on solar panels

By David Pierson, Los Angeles Times –

BEIJING — China’s state media said U.S. import tariffs imposed on Chinese solar panels are “sensible” and a “result of compromise” but warned that bilateral ties are still in jeopardy because of Washington’s tougher stance on trade.

A commentary published Wednesday afternoon by the official New China News Agency was the country’s first response to the U.S. Commerce Department’s decision Tuesday to slap tariffs of between 2.9 percent and 4.73 percent on Chinese solar panels because of illegal state subsidies.

“The U.S. government’s lighter than expected tariffs on China’s solar panel imports reflects some degree of rationality, but it has to do more to keep bilateral trade ties from derailing,” the commentary said.

It continued: “Although the solar panel case has proven to be less devastating than expected, the U.S. government recently intensified shots against a range of Chinese imports, from rare earths to steel wheels, recalling the phantom of protectionism in an election year.”

Last week, the news agency similarly warned of a diplomatic backlash after Washington pressed Beijing to loosen its control of rare earth minerals through World Trade Organization.

Liu Baocheng, a professor at the University of International Business and Economics in Beijing, said the surprisingly low tariffs would have little effect on Chinese manufacturers and likely succeeded in cooling some of the trade tension between the world’s two largest economies.

“I don’t think China will retaliate,” Liu said. “They won’t politicize this issue. They’ll probably play this down as a technical issue.”

That could change in mid-May, however, when the Commerce Department is expected to decide whether China is dumping solar panels in the U.S. market at prices below their production costs.

The solar industry worldwide has been beset by overcapacity in China’s panel production sector. The U.S. government estimates that 95 percent of China’s solar panels are exported to countries with more favorable incentives. Prices for solar panels have nosedived, putting competitors in the U.S. and Europe out of business.

China’s central government has acknowledged the problem, recognizing the proliferation of low-margin solar panel manufacturers undermines their ambitions to ramp up sustainable renewable energy sources.

“We will prevent blind expansion in our capacity to manufacture solar energy and wind power equipment,” Premier Wen Jiabao said in a speech last week at the annual meeting of the country’s legislature.

Huang Ming, chairman of Himin Solar Energy Group and a pioneer in the Chinese solar industry, said he expects half of China’s solar panel producers to shutter in the near future. He also estimates that up to 95 percent are failing to turn a profit. Huang said his own company, which focuses on solar and thermal power, is comfortably profitable and is considering opening facilities in California.

But he disagreed with the idea that the expansion of the industry was driven by government subsidies. Instead, he said, manufacturers were driven by opportunity and ultimately found a way to produce efficiently, like so many other sectors before, undercutting one another.

“Why are Chinese products so cheap? You can ask the same question in the textile industry, automobile industry and machinery industry,” Huang said in a phone interview Wednesday. “It’s all the same.”

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