The European Union launched an investigation into Chinese manufacturers of solar panels on Thursday, arguing that the companies are selling the panels at prices far lower than they should be, according to recent coverage in the Financial Times by Leslie Hook in Beijing and Joshua Chaffin in Brussels. 

The European Union is the world’s largest market for solar panels, and Chinese companies control about 80 percent of it, according to the article. 

This “underselling” of product, also called “dumping” poses a problem for European companies, who jostle for space in the remaining 20% of solar panel market-share in the EU.

According to a European Commission website on trade, 

 

“A company is dumping if it is exporting a product to the EU at prices lower than the normal value of the product (the domestic prices of the product or the cost of production) on its own domestic market.”

 

In other words, merely under-pricing other companies is not dumping.  In this case, as has been reported in the Financial Times and in Bloomberg, among other sources, generous subsidies and lines of credit given by the Chinese government have allowed Chinese companies to slash prices while posting losses. 

Under EU trade guidelines, these could constitute unfair subsidization by the Chinese government.

An article on Bloomberg.com, published last July, said SolarWorld AG, a German Solar materials manufacturer, is leading a coalition of 25 European companies collectively called the EU ProSun Group. It also reported that the American division of SolarWorld AG had already successfully filed a complaint in the US against Chinese companies and tariffs were later introduced. 

The International Trade Administration, the division of the US Department of Commerce which oversees such activity has these guidelines on its website for dumping and anti-dumping measures. 

Stefan Nicola and Marc Roca, wrote on Bloomberg.com, that China

 

“has supported companies with credit lines from state-owned China Development Bank Corp., helping Suntech and peers Yingli Green Energy Holdings Co., Trina Solar Ltd. (TSL) and LDK Solar Co. ramp up production even as panel prices fell.”

 

Also as reported in the aforementioned Financial Times and Bloomberg pieces, the Chinese government is denying any wrongdoing and is arguing that the possible tariffs would damage the trade relationship between the EU and China.  

In a final twist, an analyst from Bloomberg New Energy Finance, Jenny Chase, said that the tariffs imposed on Chinese solar panels in the US merely resulted in higher demand for panels from Taiwanese makers, and had not really affected solar panel prices.  She predicted that the primary beneficiaries of EU tariffs would be Taiwanese, Korean and Southeast Asian companies.