'Wrong Policy'

China’s Sun King Takes on Trump

  • Why it matters

    Why it matters

    China’s Trina Solar, the world’s largest solar panel producer, poses a threat to European and U.S. rivals, including SolarWorld.

  • Facts

    Facts

    • Trina Solar has taken advantage of economies of scale in Asia to challenge Solarworld’s market position in Europe.
    • Faced with dwindling cash reserves, Solarworld has teetered on the brink of collapse for years.
    • The E.U. imposed anti-dumping tariffs on Chinese solar companies in 2013, claiming that Chinese solar panels were being sold at below market price.
  • Audio

    Audio

  • Pdf

Mr. Gao, there are so many solar companies in China and prices are so low, how do you solve the overcapacity issue?

Solar is important for China. And that does not change. The next phase will concentrate on a better application for solar power. As for manufacturing, companies differ from each other. Trina Solar is adopting a platform strategy. We want to be more than just a manufacturer.

So has the overcapacity issue been solved?

Overcapacity still exists. The problems are not over yet. But they are concentrated on low quality technologies. They are easier to produce. And many companies make more than the market demands. But we are concentrating on high quality ones. And in this sector we do not see overcapacity.

But the government is still supporting loss-making solar companies, like the former market leader Yingli Solar. Won’t the problem continue so long as the government helps the loss-makers stay alive?

The central government has stressed that the market should decide over the allocation of resources. Yes, subsidies are still handed out in some cases. But you have to look at the big picture. The market will succeed eventually. Only successful companies will survive, the others will go bankrupt. That is a natural development.

“Solarworld is a company with no competitiveness. It has to drop out of the market sooner or later, and it will.”

Gao Jifan, Trina Solar CEO

In March, the EU extended anti-dumping duties on solar imports from China. What do you think about that?

Both sides should cherish good trade relations. Protectionism is the wrong way. And what the E.U. is doing is clearly protectionism. In 2013 we had already reached a compromise, a deal regarding prices. But the deal was too rigid and failed. In the end good Chinese products could not enter the market. So we had to come up with a solution.

But because of the anti-dumping duties you cannot export directly to Europe…

Yes, that is protectionism. It is ultimately meaningless. China’s leading companies all opt to sell to Europe through plants in (other) countries. The duties make no sense at all. It is just the success of lobbying by some European solar companies. But it is a grave disadvantage for customers because they have to pay a higher price.

One of the main companies pushing for the duties is Germany’s Solarworld. How do you view Solarworld?

Solarworld is a company with no competitiveness. It has to drop out of the market sooner or later, and it will. You cannot rely on government protectionism or subsidies forever. Solarworld will die, the only question is when. We don’t even care about it anymore.

What’s the biggest problem with Solarworld?

Solarworld was arrogant. CEO Frank Asbeck thought and the others thought of themselves as the best in the world. But they actually forgot to see the reality and the changing environment.

“We help European governments and European customers. The E.U. should thank us.”

Gao Jifan, Trina Solar CEO

Frank Asbeck and others in the E.U. blame China’s overcapacity for the woes of the solar industry. How much are you and other Chinese companies to blame?

That is plain wrong. Companies compete in the market. This competition brings benefits to customers. We brought benefits to European customers by improving quality and lowering costs in this competition. Without the participation of Chinese companies, do you think it would be possible for Europe to reach its goal of phasing out subsidies? That would be impossible. Without us Europe could not reach that goal for the next 20 years. We are good, not bad. We help European governments and European customers. The E.U. should thank us. Only uncompetitive companies like Solarworld blame us.

But the anti-dumping duties were extended…

That is what puzzles me. How could Solarworld convince the E.U. decision makers? That is not a good sign for Europe. They should look at the facts. Is it dangerous if prices for solar panels go down? Is it bad if the government can afford to stop subsidies? The answers are no. Solarworld’s arguments are nonsense. Uncompetitive companies, whether they are German, Chinese, Japanese or American, will die out. Would you blame Apple for the death of Nokia? No. So why do you blame us?

Who are you in that example?

We are Apple of course. And Solarworld is Nokia. Look at the history. Everybody wants Apple products. Nokia is history.

Do you think the European solar industry still has a future?

Of course. Europe is still leading the world in the solar application market. Don’t just look at solar module manufacturing. The overall solution is more important. There is a huge market in Europe.

Which European companies do you find promising?

There are a lot of big electricity companies involved. Germany’s energy company E.ON has promising projects focusing on solar energy solutions. The trend is very clear: We need clever solutions to manage the entire grid. The energy structure is changing.

Do you see an opportunity for German energy companies to enter the Chinese market?

That might be difficult. I think it’s good enough if they can do well in Germany’s new energy market.

Why is that difficult? China tightly controls its energy market. Isn’t that protectionism as well?

I simply do not see an opportunity for German companies in China. But the German market is a good one, as long as you focus on application and not manufacturing. Germany, as well as Europe, should abandon the idea of developing manufacturing. You have absolutely no advantage in that. Let me put it into perspective: have the Americans ever said that they must move the manufacturing of iPhones, move Foxconn, to the U.S.? No. China is the right place for large scale manufacturing. Maybe the new U.S. President Donald Trump wants to do it now, but it is doubtful if that is a good idea.

Do you worry that the Trump administration will harm international trade?

He wants more companies to manufacture in the U.S. For us, if their policies are good enough, we can consider moving there as well.

Have you got any plans to set up a factory in the U.S.?

Not yet, because the policies they offered are not attractive enough.

So what kind of policy is attractive for you?

(Elon Musk’s) SolarCity invested $1 billion in a project in New York state, and 70 percent of that is government subsidized. It’s been two years now and they have no results with that project yet. I’m sure we would do better. If they can provide an equal or better support to us, then we can consider it.

Are you negotiating with them then?

The U.S. side reached out to us and we talked. Nothing is decided yet. We will see. There is nothing more that I can say at this point in time.

In the recent G20 finance ministers and central bank governors meeting in Germany, the U.S. government rejected a proposal on CO2 emissions reduction. How do you think will this affect the solar industry?

Trump wants to develop the traditional energy industry, but he never said he will suppress solar energy. He is denying global warming because with the development of traditional energy, there will be more CO2 emissions. Everyone knows that Mr. Trump is wrong, you cannot ignore global warming. So I don’t think Mr. Trump’s policy can last long. As for the impact on the solar industry, it just means that the U.S. won’t see a faster development in solar energy. The global influence will be limited. Everywhere else around the world wants to develop solar energy. The Chinese government is pushing solar energy hard and is sharing our solutions with the world. We don’t care if the U.S. government promotes it or not. If they don’t, they’ll lag behind after 5 or 10 years.

Do you worry that the U.S. will lag behind?

It’s Trump’s own decision, I’m not worried. Europe is lagging behind now after five years of anti-dumping and anti-subsidy measures. There is no big impact on us.

Does that mean that you don’t care about the European market?

We will actively take part in the European and U.S. markets, and we want to improve their policies. But if their leadership made the decision, we cannot change it. We have our own paths of development, even if the policies are negative in those markets, they won’t have a big impact on our development. We can go to emerging markets, to Latin America, South East Asia, South Asia, Africa – there are a lot of opportunities out there. Those policies only harm themselves.

Chinese President Xi Jinping emphasized globalization and free trade as the goals of China in his Davos speech in January. How do you think that will affect China’s foreign policies?

With the anti-globalization trend in the U.S. and some other countries, I think President Xi’s (speech) in Davos was in line with the correct direction of global development. Globalization is beneficial especially for emerging markets. Protectionism will make no country better.

Many people criticized Xi Jinping’s speech for contradicting the level of openness in China’s market, as many industries in China are still very conservative and closed. What do you think of those comments?

China is still in the progress of opening up, but in general we are a driving force of globalization. We have made our contribution and are of course a beneficiary. There are some industries that need to open up further, not just to foreign companies, to private enterprises as well. We are advocating for it as well. We already see our opportunity in the power industry. It used to be restricted but now it is accessible for private companies. You mentioned E.ON, they can enter this market if they are good enough, we are very willing to cooperate with them.

Mr. Gao, thank you for the interview.

 

Stephan Scheuer covers China’s economy and politics for Handelsblatt. To contact the author: scheuer@handelsblatt.com

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