China Acts to Tackle Solar Overcapacity and Stabilize Market Price

China’s top regulators have pledged to rein in excessive production and undercutting in the solar industry, launching new policies to support supply chain stability and restore balance in the market.

The Ministry of Industry and Information Technology (MIIT) recently convened a high-level meeting with leading solar firms, signaling its commitment to implementing policy directions set by the Central Financial and Economic Affairs Commission. The goal is to address what officials describe as “disorderly” competition and guide the sector onto a more sustainable path. 

Presiding over the meeting, MIIT Minister Li Lecheng met with executives from 14 prominent companies—including Longi, Tongwei, GCL, Trina, JA Solar, and Sungrow—alongside representatives from the China Photovoltaic Industry Association (CPIA). The meeting followed the Central Committee’s sixth economic work session held on July 1, where top leaders called for an end to irrational pricing, the phasing out of obsolete production, and improvements in manufacturing standards. 

In an official statement, the MIIT emphasized the need to “resolutely curb disordered low-price competition” and support the “orderly withdrawal of outdated capacity.” Minister Li underscored the importance of industry self-regulation and urged companies to prioritize innovation, enhance product quality, and focus on long-term resilience. 

The meeting came against the backdrop of a broader national debate on “involution”—a term used to describe intensely competitive yet unproductive environments often referred to as a “rat race.” 

Ahead of the MIIT conference, the state-run People’s Daily ran a front-page editorial denouncing destructive pricing strategies and calling for structural reforms to bring order back to the solar market. 

Some segments of the industry have already begun adjusting their operations. In the solar glass sector, ten major producers—including Xinyi Solar and Flat Glass—announced they would reduce production by 30% in July to address surplus issues. 

Meanwhile, consolidation is gaining momentum in the polysilicon space. GCL Technology’s co-CEO recently said at an industry fair that major players are looking into mergers and acquisitions to absorb smaller firms. Daqo New Energy echoed this sentiment in a July 1 statement, expressing support for joint efforts to address overcapacity. 

Data from the China Nonferrous Metals Industry Association shows that polysilicon prices have remained below production costs for over a year, prompting at least four producers to halt operations in the first half of 2025. 

Investors responded swiftly to the policy announcements. Solar stocks rallied in both mainland China and Hong Kong after the MIIT meeting, with shares of nine domestic solar firms—including Tongwei, Flat Glass, and Eging PV—hitting their daily trading limits on July 3. Daqo Energy jumped more than 15%, while GCL’s Hong Kong-listed stock rose 9%. 

Despite the initial market reaction, analysts caution that meaningful restructuring may take time. Although Beijing has made its policy stance clear, entrenched overcapacity remains a systemic issue across the solar value chain. Streamlining operations in silicon, wafers, and module production could require months or even years. 

The central message from policymakers is unmistakable: China’s solar industry—once a flagship of industrial success—is now under pressure to shift from rapid scaling to quality-driven consolidation.