Is China's Debt a Threat to the Solar Sector?

Global solar industry threatened by Chinese companies' cash crunch

Heading into 2020, corporate debt in China ranked as the global solar industry's biggest challenge, according to Paula Mints, chief analyst at SPV Market Research. Corporate defaults in the country's solar sector could disrupt the global solar industry, threatening demand in the world's biggest market and leading to warranty and quality issues among manufacturers, Mints has warned in recent months.

China has long viewed solar as a key strategic industry, and it used massive amounts of debt to build a dominant position in the global market. However, concerns have been growing recently about the risk of corporate defaults across China's economy. S&P Global Ratings said in late 2019 that it expected onshore bond defaults in China to rise this year, due in part to tight liquidity conditions for privately-owned enterprises.

Some analysts and market participants are less troubled by the broader threat posed by corporate debt in China's solar sector.

Debt in China's solar sector "is an ongoing issue, but I would say it's certainly not relevant right now because the government's doing everything they can to back up every manufacturer and prop up every sector of the economy" in response to the pandemic, Clean Energy Associates Ltd. CEO Andy Klump, who is based in China, said in a March 12 interview. "So I actually see there being more corporate debt that's going to go in."

Read what industry experts have to say and the full S&P Global Market Intelligence article here.