In a recent New York Times opinion piece, a former United States Deputy Trade Representative pressed the panic button about a special report by the Paris-based International Energy Agency. that China currently dominates global solar PV supply chains.
According to the report, China’s share of all stages of solar panel manufacturing (such as polysilicon, ingots, wafers, cells and modules) exceeds 80%, more than double its share of demand global photovoltaics. Additionally, China is home to the world’s top 10 suppliers of solar PV manufacturing equipment.
The report highlights that China has been instrumental in reducing the global costs of solar PV products, with multiple benefits for the clean energy transition. At the same time, the level of geographic concentration in global supply chains also creates potential challenges for governments to address.
Former deputy U.S. Trade Representative Robert Holleyman, who served in former President Barack Obama’s administration, has claimed that state-sponsored competition from China has decimated the U.S. solar panel industry. The United States’ share of global solar component shipments has fallen from 13% in 2004 to less than 1% in 2021.
He argued that the failure to create a strong domestic solar manufacturing industry leaves the United States and its carbon reduction goals not only dependent on China, but also vulnerable if China blocks or threatens to block its solar exports. as a form of retaliation in the future.
He urged President Joe Biden’s administration to step up enforcement of tariffs on Chinese imports of solar panels, allegedly via third countries in Southeast Asia, and to ensure that the US Congress reaches an agreement to spend on large-scale clean energy development and tax credits for solar manufacturing, with an ostensible goal of decoupling the Chinese solar panel industry.
This latest solar panel saga seems to be part and parcel of a persistent American bipartisan narrative of the “China threat”. Often there is a tendency towards a blind decoupling strategy based on political correctness rather than a reasoned analysis of costs and benefits.
For example, the Biden administration appears to have discovered recently that indiscriminate decoupling with or without tariffs could be a double-edged sword, harming national interests through painful supply chain disruptions, rising cost of living and inflationary pressures on the Federal Reserve’s freedom of maneuver.
Consequently, there has been recent speculation that Biden may decide to roll back some of former President Donald Trump’s tariffs on Chinese household items.
The need for the United States to adopt a more targeted approach to strategic decoupling is laid out in depth in a report by the Carnegie Endowment for International Peace. The report recognizes that the US technology base is intertwined with China in a larger, globally spanning technology network.
Without a clear strategy, there are risks of doing too little or, more likely, too much, to curb technological interdependence with China. In particular, Washington can accidentally trigger a chaotic, uncontrollable decoupling that it can neither predict nor control.
Coming back to solar panels, it is important to recognize, first, that it is primarily a question of production capacity, rather than advanced strategic technologies.
As the world’s largest manufacturer, China is the biggest producer of many things under the sun, not just solar panels. This is made possible by a nationwide interconnected manufacturing base, a global logistics network comprising seven of the world’s top 10 container ports (including Hong Kong) and global connections to the Belt and Road, without forget a “digital silk road” of e-commerce. .
Second, thanks to its huge labor pool and much lower cost of living, China is able to produce things like solar panels much more economically, with or without state subsidies. .
Third, it is in China’s strategic interest to fight climate change, not only for ecological sustainability, but also to wean the country’s heavy reliance on imported energy.
In the Hong Kong Special Administrative Region, as part of the 2050 Climate Action Plan, the government is taking the initiative to promote the use of renewable energy in government premises and to encourage the private sector to make same.
With Hong Kong’s dense urban concentration of apartment and office buildings and abundant sunshine, the city’s demand for solar panels and other photovoltaic materials is set to explode in the coming decades.
Fourth, as the world embraces renewable energy, there is no shortage of customers for China’s competitively priced solar panels. By all means rebuild the US solar industry, but a hasty decoupling of Chinese solar panels would not only dramatically increase the costs of the US renewable energy transition, but possibly slow its green energy trajectory due inadequate substitutes or supply bottlenecks.
Fifth, one wonders whether a generalized decoupling from China would work. Despite all the rhetoric about decoupling, U.S.-China trade grew more than 20% last year, to $687.2 billion, while foreign direct investment inflows rose by a third to hit a record high of $334 billion. In the first quarter of this year, they were up more than 25% year-on-year, according to the Beijing-based Center for China and Globalization.
Meanwhile, there are many global issues such as climate change, reform of global institutions, nuclear non-proliferation and regional stability on which the two great powers can reflect and cooperate, and compete where appropriate.
The author is an independent Chinese strategist and former director general of social welfare in Hong Kong. Opinions do not necessarily reflect those of China Daily.