EU probe may spark wider dispute

EU investigation into China's solar industry 'could lead to retaliation'

China is considering taking retaliatory measures against a likely investigation by the European Commission into Chinese photovoltaic companies, a source from the Ministry of Commerce said on Tuesday.

Media reports have speculated that the commission, the executive body of the European Union, will announce such an investigation before Thursday. The action is being sought by Germany's SolarWorld and other European companies, which on July 24 filed an anti-dumping complaint against their Chinese competitors.

In the face of the current global economic troubles, most Chinese photovoltaic companies have suspended their production this year. Authorities in the country have hinted they will retaliate against European wine and German exporters of polysilicon, if the solar case were to go forward.

"We have been consulting with the EU about this matter in recent days, but we are not optimistic about the result," said the ministry source, who requested anonymity.

The source also said: "The investigation involves a large number of Chinese solar panel exports" and "would strike a big blow to the local industry".

"China is also studying how to respond to the case and how to fight back appropriately," he added.

Europe is China's most important market for solar products. Of China's $35.8 billion worth of solar product exports in 2011, the EU received more than 60 percent, or worth $20.4 billion.

Some industry insiders believe that if the EU decides to start an investigation, a large number of Chinese PV companies will be at risk of bankruptcy.

During a visit to China last week, German Chancellor Angela Merkel said she hoped the trade dispute could be solved through negotiations.

The ministry source said the EU recently "sent a note to the Chinese government about the investigation".

"We appreciate Merkel's words, but her views do not represent those of the EU," he said.

If the EU does start an investigation, it will be the largest trade dispute measured by trade value to involve China.

The industry's troubles are likely to bring about painful changes, including mergers, bankruptcies, factory closuress and layoffs. An imposition of new tariffs on Chinese solar panels by the EU would be another blow to these already weakened companies.

The investigation the EU is considering will look into all Chinese-made photovoltaic products, a group of goods worth nearly 1 trillion yuan ($158 billion) in total.

If the EU rules that dumping has indeed occurred and begins to raise tariffs, the trade, policies, economies and societies of China and European countries will all be affected, said Zeng Shaojun, secretary-general of the China New Energy Chamber of Commerce under the All-China Federation of Industry and Commerce.

Miao Liansheng, chairman of the board of the Chinese company Yingli Green Energy Holding Co Ltd, said an acceptance of the anti-dumping case will lead Chinese photovoltaic companies to move to other countries and a loss of development opportunities for the industry.

According to the China Nonferrous Metals Industry Association, 9,300 metric tons of polysilicon products were imported from the EU in the first half of 2012, up 30.8 percent year-on-year.

In a preliminary ruling in May, the US imposed anti-dumping tariffs on solar panels imported from China, setting them at between 31.14 percent and 249.96 percent of the price of those products. Two months before, it had imposed countervailing duties equal to 2.9 percent to 4.73 percent of the price of Chinese panels.

The Ministry of Commerce announced on July 20 that it will start anti-dumping and anti-subsidy investigations into solar-grade polysilicon imported from the United States.