Friday, December 3 2021 | ASIA TODAY INTERNATIONAL - Reporting the Business that Matters in Asia
Is sun setting on China’s Sunshine boys?
SHI ZHENGRONG is not alone in finding times tough in China’s huge solar industry.
Another industry leader, LDK Solar, almost collapsed in August last year after defaulting on debts of RMB60 million . . .
THE name Shi Zhengrong came into Australian media consciousness in March 2006 when Forbes magazine named him Australia's third richest man.
Australia had gained a billionaire it did not know existed — until then.
Forbes calculated that Shi, who came to Australia in 1989 to do post-graduate studies in physics at the University of NSW, had, by 2006, achieved a net worth of US$2.2 billion.
Shi credited his former professor, Martin Green, of the University of NSW, for his success. It was Green who encouraged him to switch to solar technology because it had "a lot of funds for research". Shi studied under Green, a well-known world leader in photovoltaic technology, for three years.
Finding investment funds difficult to come by in Australia, Shi returned to his former home in Wuxi, in the province of Jiangsu, in 2000, where he founded Suntech Solar Power, a solar cell manufacturing company, in 2001. Then came a meteoric rise to the top of the wealth totem pole, as Shi saw his country of birth rise in economic strength globally.
Shi's name has now jolted the collective Australian memory again, with his high-flying company, the New York-listed Suntech, collapsing, and Shi himself being ousted as Chairman.
In the halcyon days of success, Shi kept company with Prime Ministers and the business elite. When interviewed by this correspondent in 2007, he recounted animatedly a conversation with then-Prime Minister John Howard over dinner in Canberra.
China's sunshine boy, as Shi was then dubbed by the international press, told me: "I said to the Prime Minister, as far as I understand, it will take 10 years to plan for nuclear power. In reality, solar power will definitely be very competitive with conventional technology in 10 year's time. There is no need to go to nuclear power."
Shi told Howard that Australia should promote renewable energy, such as solar energy. "Australian sunshine is an asset," he said. “Australia has probably the bluest sky in the world.” It was so different to his native Wuxi, he added, blighted by pollution and environmental degradation.
Shi and his cohorts of newly-minted billionaires in China to some extent rode on China’s good fortune and Government largesse. In that sense, their hold on success was liable to be tenuous.
Ready access to credit, and access to the global market, depended on continuing goodwill from their banks, the vagaries of foreign markets, and good relations with China's trading partners.
Suntech is said to owe a total of 7.1 billion yuan (US1.14 billion) in foreign currency and RMB loans to a consortium of banks which this month pulled the plug. Suntech in 2011 was the world's largest solar panel producer.
But Suntech is certainly not alone in the corridor of the Sun Kings.
Take LDK Solar. Established just seven years ago, it has become the world's largest producer of solar wafers in terms of capacity, and a leading producer of high purity polysilicon and solar modules.
Last August, LDK Solar defaulted on payment of 600 million yuan to 20 raw material and equipment suppliers — revealing the first crack in an industry which had been much encouraged by the authorities. The Jiangxi Government tried gallantly to save it from collapse — and apparently succeeded, although the company’s share price has collapsed.
In a client note late September, UBS analyst George Magnus wrote that, collectively, China's 10 largest solar companies then owed a staggering 111 billion yuan.
Chinese official statistics show that 90 per cent of China-made solar products were exported in 2012 — 70 per cent went to the European Union and 10 per cent to the United States.
But a long-running dispute with the EU over European allegations that the Chinese Government subsidises its solar product manufacturers has come to a head. The EU accuses Chinese companies of dumping their products, and exports to Europe have stalled.
Across the Atlantic, the US Government in November slapped an anti-dumping duty of almost 250 per cent, and a countervailing duty of nearly 16 per cent, on imported Chinese solar products.
Chinese solar manufacturers were warned of massive over-production as far back as 2010, when the China Renewable Energy Society told them to be cautious about output expansion. Over-capacity became evident when the GFC hit and economies in the developed world contracted.
Beijing has a policy of supporting renewable energy to boost its energy requirements, and solar energy, like wind or biomass, is very much part of the mix. China’s State Grid, the national utility company, recently threw a lifeline to small solar energy producers by giving them free connection to the grid.
China is now the world’s largest solar market, so, perhaps, the industry is just going through a short-term speed bump. One optimistic note: The California-based market research institute, NPD Solarbuzz, points out that Japan and India have new policies supporting solar power. Demand from these countries will stimulate regional growth.
*Florence Chong is Editor of ATI Magazine.