Revitalization in the Solar Industry: New Capacity Control Policies Spark Significant Market Gains

The solar photovoltaic sector is experiencing a remarkable resurgence. On October 14, the main photovoltaic industry chain in the A-share market saw a collective surge, with companies such as LONGi Green Energy (601012.SH) and JA Solar Technology (002459.SZ) hitting their upper limits. During trading, Trina Solar (688599.SH) surged over 15%, while JinkoSolar (688223.SH) rose by more than 10%. By the end of the trading day, Yichin Photovoltaic (600537.SH) reached its daily limit, with Trina Solar climbing 8.39%, JA Solar Technology increasing by 7.03%, and LONGi Green Energy along with Jingyuntong (601908.SH) rising over 6%. Other companies like Aiko Solar (600732.SH), 东方日升 (300118.SZ), Tongwei Co. (600438.SH), Shuangliang Eco-Energy (600481.SH), and Hongyuan Green Energy (603185.SH) all saw increases of over 5%, while JinkoSolar rose more than 4%. In the Hong Kong market, Xinyi Solar (00968.HK), GCL-Poly Energy (03800.HK), and Flat Glass Group (06865.HK) also experienced gains exceeding 4%, although they later pulled back.

According to data from Dongfang Caifu, the photovoltaic equipment sector saw a net inflow of 1.969 billion yuan, making it the second highest in the A-share market, with LONGi Green Energy being the top stock in terms of net inflow. This broad upward trend was catalyzed by two market rumors: one concerning a new capacity control policy and the other about a polysilicon reserve platform company, which is expected to be finalized this month.

Reports indicate that the new capacity control policy is being drafted by the National Development and Reform Commission along with five other ministries. It aims to prohibit the addition of new production capacity and limit the operating rates of existing capacity across all stages. According to individuals close to the authorities cited by China Securities Journal, the document is expected to be released soon to promote a balance between supply and demand for capacity. An industry authority confirmed to Securities Times that such a document does exist. Industry professionals from first- and second-tier manufacturers have also indicated to Pengpai News that this is indeed the case. Furthermore, executives from leading companies in specific segments believe that the probability of the document being released soon is high. However, no formal version of the document has yet been seen.

For several months, top silicon material manufacturers have been advancing what is referred to in the industry as the “reserve” plan for polysilicon capacity integration. Last weekend, rumors circulated that the platform company would be registered this Wednesday, leading to a brief rise in polysilicon futures prices before they fell back. Nanhua Futures published a report stating that the platform company is expected to be established by mid-October. On October 14, an industry media outlet reported that the platform company is on the verge of being established and will soon complete the approval process, noting that a joint account for the platform may have already been set up, with expectations that future polysilicon capacity could be reduced by millions of tons.

This year, continuous losses and operational pressures have created unprecedented consensus in the industry regarding production limits and price stabilization. Since July, cross-ministerial collaborative mechanisms have been implemented to combat “involution.” Due to strong expectations against involution, a self-discipline agreement on “selling at no less than cost price,” and some production cuts, the prices of silicon materials and wafers have risen significantly, and the prices of cell and module components have also recovered somewhat. The Ministry of Industry and Information Technology has already held two high-profile discussions about the photovoltaic industry.

The meeting on July 3 primarily focused on conveying the central government’s attention and support for photovoltaic manufacturing companies, acknowledging China’s competitiveness and growth in the global photovoltaic industry. In contrast, the meeting held just 46 days later appeared more like an action guide aimed at “further standardizing competition within the photovoltaic industry.” Multiple sources have confirmed to Pengpai News that several leaders from photovoltaic companies who attended the first round of discussions participated in the meeting on August 19, covering all stages of the main industry chain. Additionally, representatives from state-owned power generation enterprises also attended.

The Draft Amendment to the Price Law of the People’s Republic of China, open for public consultation on July 24, includes ten articles focusing on improving government pricing, clarifying standards for identifying unfair pricing practices, and enhancing legal responsibilities for price violations, targeting “involution-style” competition. On August 1, the Ministry of Industry and Information Technology issued a notice regarding the special energy-saving inspection task list for the polysilicon industry for 2025, mandating special energy-saving inspections for 41 polysilicon companies located in regions including Inner Mongolia, Sichuan, Yunnan, Qinghai, Ningxia, and Xinjiang, covering all domestic polysilicon production companies. Polysilicon is the starting raw material for the photovoltaic industry and plays a crucial role in combating involution.

In terms of foreign trade, the China Chamber of Commerce for Import and Export of Machinery and Electronic Products has called for a strong resistance against improper competitive behaviors such as exporting below cost. There are widespread rumors that the cancellation of export tax rebates for photovoltaic products is imminent. Recently, there have been signs that efforts against involution in the photovoltaic sector are accelerating. On October 9, the National Development and Reform Commission and the State Administration for Market Regulation announced measures to address chaotic price competition and maintain a healthy market pricing order.

The announcement suggested that for industries facing significant issues with disordered price competition, industry associations and related organizations, under the guidance of the National Development and Reform Commission, the State Administration for Market Regulation, and industry authorities, could assess average industry costs to provide references for reasonable pricing. Furthermore, the regulatory bodies will pay close attention to operators who fail to regulate their pricing behavior even after receiving warnings and, if necessary, conduct cost investigations and pricing supervision checks. Any discovered violations will be dealt with legally. Operators are expected to strictly adhere to the Public Bidding Law of the People’s Republic of China and its implementing regulations, self-regulating their bidding behaviors, and refrain from bidding below cost to ensure product and service quality.

Currently, the photovoltaic industry’s challenges also stem from insufficient demand. Notably, due to a rush in installations, the domestic photovoltaic capacity saw a sharp increase in April and May. However, after hitting a record high of 92.92 GW in May, representing a staggering year-on-year increase of 388.03%, the newly installed capacity has seen a consecutive decline: in June, the newly installed capacity was 14.36 GW, down 38.45% year-on-year and 84.55% month-on-month; July saw approximately 11 GW, a 47.7% decrease year-on-year, marking a new low since 2025; and in August, only 7.36 GW was added, a 55.29% year-on-year drop and 33.33% month-on-month decrease.

Until the pricing mechanisms for electricity are established, investment in new energy remains stagnant. A seasoned industry insider commented that the so-called “market-driven legal approach” to promoting the orderly exit of backward capacity fundamentally emphasizes reliance on market forces, advocating for rational competition to phase out outdated capacity. “The industry must also reflect, at the very least, it should not solely wait for the government to implement specific policies to combat involution.”