CHAPTER 4

WHY CHINA? THE ADVANTAGEOUS POSITION OF CHINA’S PV INDUSTRY

In the near future, any and all applications of PV technology, from the PV power plants in Golmud, Qinghai Province, to the rooftop solar panels of households in Hainan Province, will become part of a larger Chinese PV market.

Boasting a territory of 9.6 million square kilometers, a population of nearly 1.4 billion, a bank balance of over 100 trillion yuan, and an annual economic growth of 9.8% for 30 consecutive years, China has become the world’s second-largest economy.

China has a group of outstanding entrepreneurs who have grown up after the beginning of reform and the opening up of society. By making use of policy (a “visible hand”) and the market (an “invisible hand”), China’s PV technology has developed faster than Europe and the US, and so gained the competitive advantage in this sector.

China’s PV industry has “ten advantages.” We believe that China is grasping the opportunities brought by the new energy revolution and the third Industrial Revolution. China will tear off the label of being “a big country in PV manufacturing and a small country in PV applications” currently applied to it, and instead become a true PV leader in the world.

Breaking the Energy Bottleneck

China is already the second largest economy in the world, while its energy consumption (per unit of GDP) is more than twice the global average, and three to six times that of other developed countries, even higher than India. Energy has become a “bottleneck” and a “weakness,” constraining China’s sustainable economic growth.

Carrying out a new energy revolution and adopting a strategy focusing on new and alternative energies are the only solutions for breaking though the “energy bottleneck” and overcoming “energy weakness.” The protagonist of this revolution is the solar PV industry.

Popularizing PV application is like killing many birds with one stone for China’s dream of becoming a strong country. It can stimulate domestic demand by transforming the investment-driven economy to a consumption-driven one, promote industrial restructuring and the acceleration of the transformation of China’s economic growth model, and help China achieve its goal of energy saving and reduction of emissions.

The Rising Giant’s Energy Bottleneck

As the focus of global development has shifted to emerging markets, China has been leading these emerging markets. On May 16th, 2005, the Ninth Fortune Global Forum was held in Beijing. Eight years later, the forum was held in China again: on June 6th, 2013, Chengdu played host to the Twelfth Fortune Global Forum, with the theme being “China’s New Future.”

Why was the Fortune Global Forum held in China again so soon? Because this country has outperformed other emerging nations in a variety of aspects: a potential market with a population of nearly 1.4 billion, the rapid economic growth, the continuously improving infrastructure, the stable society, and the many opportunities for development. China has just become a middle-income country and is encountering many new opportunities. Meanwhile, China still adheres to its policy of opening up, and continuously deepens its reforms: this greatly appeals to foreign investors, both in terms of the specific policies, and their effect on the hardware and software markets.

It is necessary to have a look at China’s excellent economic performance from 1952 to 2012. In a time of global economic growth, China made especially great achievements.

From 1952 to 2008, China’s GDP grew 8.1% per year on average; its economic aggregate increased 77-fold; and China became the third largest economy in the world. The GDP was only 67.9 billion yuan in 1952, increasing to 364.5 billion yuan in 1978, and finally reaching 30.067 trillion yuan in 2008, with an average annual increase of 8.1%. China’s economic aggregate accounted for 6.4% of the world total, behind only that of the US and Japan.¹

Over the past five years, China’s economic strength and comprehensive national power reached a new level. From 2007 to 2012, China kept growing 9.3% annually, as the world’s second-largest economy. In 2012, its GDP exceeded 50 trillion yuan, and the per capita GDP reached 38,400 yuan. In 2010, China’s national income per capita helped China gain a position among the “upper-middle income” economies.

Since 2013, the global economy has witnessed a lull, while China maintained its rapid growth relative to other emerging economies. After years of sustained and double-digit growth in GDP, China expects to achieve a year-on-year increase of 7% or 8% in the next decade, which is still higher than other economies. However, this indicates China has slowed down its economic growth by focusing on the quality of this growth. In fact, this also shows that the extensive growth model of the past was unsustainable.

In 2011, China surpassed Japan in GDP and became the world’s second-largest economy. Meanwhile, China was also one of the world’s largest energy consumers, especially of coal.

In 2010, China consumed 3.25 billion tons of standard coal. In 2011, China and India contributed 98% of the global net growth in coal consumption, and China became the biggest coal consumer in the world. In 2012, the energy consumed by China reached 3.62 billion tons of standard coal, equivalent to the total consumption of the rest of the world.

China is both a developing country and a manufacturing power, which justified China’s high consumption of energy and low efficiency of energy use. At present, China’s energy consumption per capita is equivalent to the world average, while the per capita GDP is only about half of the world average.

It will take a long time to reduce energy consumption per unit. However, with the expansion of the economy and the continuous improvement of people’s quality of life, energy consumption will increase correspondingly, even though energy efficiency has been improved. It is estimated that China’s annual energy consumption will reach 5.5 billion tons of standard coal in 2020; and 7.5 billion tons in 2030. In other words, the total energy consumption will keep growing gradually in the near future.

However, energy reserves in China cannot meet the country’s increasing demand. It is estimated that according to the current exploitation rate, the proven oil reserves in China will be exhausted within less than 10 years, and those of natural gas and coal within 33 years.

In order to ease the tension between growing energy demand and its insufficient reserves, the State Council requires that total energy consumption be capped in China to below 4 billion tons of standard coal by 2015.

However, it is basically inevitable that China will accelerate its industrialization and urbanization processes in the coming years, and that China will maintain high energy demand throughout this time. To provide sufficient energy to meet this demand is a challenge. China will face more pressure on the sustainable development of its resources, ecology and environment.

The energy bottleneck has become the biggest constraint for China’s economic sustainability. So what can we do?

Why is energy supply the bottleneck and weak point in China’s sustained growth? There are three inevitable problems. First, more energy will be consumed during economic growth. This connection between growth and energy is inevitable. Second, China’s reserves of fossil fuels cannot meet its own demand. This reality is also inevitable. Third, this fossil energy consumption is bound to cause more and more serious environmental damage. This causality, too, is inevitable.

Here, we can see that these reasons make the bottleneck difficult to avert, or simply unavoidable. Why do the three causes exist? The consumption of fossil fuels can explain everything. If China stops or reduces its consumption of fossil fuels, these inevitable connections will no longer exist.

Therefore, the simplest countermeasure against the energy bottleneck would be the following: carrying out the new energy revolution, replacing fossil fuels with new energy, changing the energy mix, and making new energy dominate energy consumption. If inexhaustible solar energy can meet continuously increasing energy demand, the first connection will fall away. Solar energy is everywhere and it is green, so the other two causes will disappear also. Therefore, we can see that solar energy can easily solve these three problems.

In 2011, the coal used for power generation accounted for 53% of China’s total coal consumption; that is, China burns 1.46 billion tons of coal for power generation in one year. If solar energy can replace at least 50% of this coal consumption, then coal consumption will be greatly reduced, and pollution will be largely abated.

In China’s northern and coastal areas, annual sunshine duration reaches more than 2,000 hours. In particular, the sunshine duration in Hainan is over 2,400 hours per year. China is a truly sunshine-abundant country.

Boosting Transformation and Becoming Strong Through PV

It was snowing on December 16th, 2012, when the Economic Work Conference of the CPC Central Committee concluded in Beijing. American think tanks said that the Chinese government was undergoing a great reform: the transformation of its economic development mode. When the global economy was in a fundamental transition, China was extremely brave to make such a choice, one it made so that the reform would lay a solid foundation for China’s growth over the next five decades. Only a smooth transition can help realize China’s sustainable development.

China’s economy is facing two transformations: the transformation of the “development mode” and the transformation of the “development model.”

The “development mode” was formerly known as the “growth mode.” In order to distinguish the concepts of “development” and “growth,” and show that “growth” is not the same as “development,” “growth mode” was changed to “development mode.” At present, China’s economy is developing in an extensive manner; boasting high input, high consumption, high emissions, low output and low efficiency.

In 2009, China’s output of crude steel was 568 million tons, and its cement output was 1.65 billion tons, accounting for 43% and 52% of the world total respectively. And most of that was consumed by China. The primary form of energy consumed was the 3.1 billion tons of standard coal China used that year, accounting for 17.5% of the world’s total. China’s GDP over the same period was 34 trillion yuan, accounting for 8.7% of the world total. The ratio between the proportion of China’s energy consumption of the world total, and that of output was 2:1, far behind the world average. All of the above shows that China is still in a stage of extensive development.

Since the outbreak of the financial crisis in 2008, the issue of the “development model” has become more and more prominent. China’s current development can be described as depending on extensive expansion and foreign trade. The extensive expansion means increasing inputs to get more outputs, and the overdependence on foreign trade is a result of specific historic conditions. Since China’s entry into the WTO in the early 21st century, it has broken through various trade barriers. China’s products penetrated global markets with low costs and low prices, especially the markets of various developed countries. The shelves are full of goods labeled “Made in China.” For nearly a decade, China’s foreign trade has witnessed double-digit growth. China built up trade surpluses in many countries. Thus, since China became a manufacturing power, 70% of its economic growth has come to rely on foreign trade.

The global financial crisis in 2008 made this development model, which excessively relies on foreign trade, unsustainable. In order to overcome the crisis, developed countries forced China to appreciate its currency; they wanted to weaken the competitiveness of Chinese products. They frequently took protectionist measures to block the import of China’s products. They also canceled a large number of orders for Chinese products. For example, in Dongguan, Guangdong Province, thousands of enterprises, mainly relying on foreign orders, simply collapsed. This is just a microcosm of the affected regions in China, and the difference was only a matter of degree. The following is a fact: the higher the dependence on foreign trade there is, the greater the impact on business will be.

In this financial crisis, the Chinese asked themselves, “Why did the crisis spread to China, to the extent of having such a great impact on China’s economic growth?” It comes down to China’s development model relying to such a degree on extensive expansion and foreign trade, which has at least three drawbacks.

First, this model makes China consume more energy and resources, and causes more environmental pollution.

It was thanks to this model that China became a manufacturing power. The positive side of it is: compared with the past, China’s economy has made progress. The negative side is: this development model is unsustainable. In human economic activities, manufacturing is the biggest consumer of energy and resources, and the biggest environmental polluter. If China maintains the model “Made in China, Consumed by the World,” it will suffer severely from having insufficient energy and resources to handle such heavy consumption, as well as from the polluted environment caused by this kind of consumption.

Second, it is difficult for China to change the distressing situation of “buying expensive and selling cheap” on the international market. To meet the worldwide demand for products requires sufficient energy and resources, but China’s own energy and resources are far from sufficient. It has to resort to importing a large amount in these areas. In order to ensure its large-scale production capacity, China had to import raw materials at high prices. For example, the price of oil per barrel on the international market has risen from several dollars to dozens of dollars, even to more than one hundred dollars. No matter how high the price is, China has no choice but to purchase more. Another example can be seen in the field of iron ore. Sometimes, iron ore prices increase by several tens of percentage points or even doubled, but China still feels incapable of bargaining. Those with resources have the final say. The export of China’s products mainly relies on low prices. The more one makes, the more challengingly one prices its products. In addition, the bloody pricing war among domestic enterprises makes the price per unit produced lower still. And this trend has become irreversible. The model of “buying expensive raw material and selling cheap products” has minimized China’s economic benefits. Over time, China will suffer losses.

Third, huge foreign exchange reserves cannot be used effectively. With the increase in foreign trade, China’s foreign currency reserves accumulated rapidly, exceeding USD 3 trillion in 2011; reaching USD 3.31 trillion at the end of 2012; and totaling USD 3.5 trillion at the end of June, 2013, ranking first in the world. This certainly marks China’s economic rise, but it also concerns this country’s sustainable growth, because that large an amount of foreign exchange reserves cannot be used efficiently. As the Western developed countries have not recognized China’s market economy status, some countries even take up containment policies. When China wants to buy their high-end new technologies with foreign exchange, they refuse to sell. When China wants to purchase valuable corporate assets or energy and resources from them, they set up obstacles. A large amount of foreign exchange has to be reserved as US dollars in foreign banks, or be used to purchase US Treasury bonds. Since the “gold standard” was abandoned in the 20th century, the US has had more freedom to decide on the circulation and value of its currency, in line with its own needs. It can transfer its economic problems to other countries, and take other countries’ wealth or even make it evaporate without being noticed. From this perspective, the larger the foreign exchange reserve China has, the less safe its economy will be.

Therefore, even without the financial crisis, the model that depends on extensive expansion and foreign trade is unsustainable in the long term. Thankfully, this crisis has made us realize this sooner rather than later. Our task is to change this distressing situation by taking certain initiatives.

In the context of the global economy, a successful economic transformation needs China to be well prepared in four key aspects. First, China must maintain a steady growth rate that must not be significantly reduced due to the transformation. Second, as the driving force behind foreign trade weakens, China must strengthen instead its domestic demand, including investment-led and consumption-driven demand. Third, China must realize intensive economic growth by restructuring its industry, upgrading its technology and improving their management. At the same time, it should improve the quality of both its macro economy and its micro economy. Fourth, China must reduce environmental pollution, and strengthen the construction of a truly ecological civilization.

Economic transformation requires many arduous, painstaking efforts. The key is to achieve a new economic growth point to meet the four requirements above. On July 15th, 2013, the economic data released by the National Bureau of Statistics showed that China’s GDP was 24.8 trillion yuan in the first half year alone, with a year-on-year increase of 7.6%. The policies launched after 2013 indicated that the central government would tolerate a slightly lower growth rate, but required a better quality of growth. Tolerating the negative impact of economic slowdown to give more time and space for the transformation of the development mode may be “courage” in the eyes of US think tanks. Nevertheless, this tolerance has a limit. After all, the nation’s development is our absolute priority. So a growth point that can realize both the desired economic growth rate and the required transformation of the development mode is highly anticipated.

I believe that the solar industry is one of the new growth drivers in China’s transformation. How can the PV industry lead China’s economic transformation?

First, this industry has a large market. It is estimated that in urban and rural China, there is a construction area of nearly 90 billion square meters that can be used for PV power generation. If the conversion efficiency of cells is 10%, and if 15% of eastern, southern and western walls, and 20% of rooftops are installed with cells, there will be 1000GW of installed capacity nationwide, approximately equivalent to the total installed capacity of thermal power, hydropower and nuclear power. It would also equal the capacity of 45 Three Gorges Dams. This will directly boost the market to the tune of 10 trillion yuan. BIPV (Building Integrated Photovoltaics) itself can bring 30 trillion yuan to the market, three to five times as much as the value contributed by China’s automobile industry. In addition, there are the PV power markets for large-scale concentrated generation and energy-saving appliances (e.g., for mobile energy terminals), both of which have great development potential.

Second, this market can open up immediately. The feed-in tariff standard for large-scale centralized power generation has already been released. The distributed generation policy of “incorporating the spare electricity after home use into the grid” has been introduced. If the government can provide a certain degree of property tax relief, then new buildings under construction could be installed with power generation systems on a massive scale.

Finally, in addition to the first two reasons, the emerging solar industry can play a multi-faceted role in China’s economic development.

Role one: the PV industry can stimulate domestic demand, shifting the PV market from an investment-led mode to a consumption-driven one. The PV market is a liberal one, where households can generate power for their own demands.

In May 2012, the Ministry of Housing and Urban-Rural Development issued the 12th Five-Year Special Plan for Building Energy Saving, in which the applicable construction area of renewable energy buildings (mainly BIPV) was set at 2.5 billion square meters, 60 times larger than the 40 million square meters of the demonstration areas specified in the 11th Five-Year Plan’s period. This indicates that BIPV will lead the PV industry and so usher in a boom.

Meanwhile, the Ministry of Finance made an announcement that the governmental subsidy for the new BIPV projects would be tentatively set at 9 yuan/watt, 3 yuan higher than it was in 2011.

Role two: China should actively promote the PV market, which will facilitate industrial restructuring and the transformation of the development mode. The most important words in the 2012 Central Economic Work Conference were “redefining China’s strategic opportunity.” It is no longer the traditional kind of opportunity that takes the form of simply becoming one part of the greater global labor market, expanding exports, and accelerating investment. Rather, it is a new opportunity which forces China to expand its domestic demand, improve its innovative capabilities, and promote the transformation of the economic development mode. It shows that China will never be taken for the “world’s factory” again, and will never be shackled by the game’s previous rule, the “theory of global labor division.”

The term “world’s factory” refers to the idea that the Western world makes use of China’s resources and labor to serve themselves, while China has to consume a huge amount of its energy and resources. When China lacks energy and resources, it has to import them at a high price. For some major materials (such as crude oil, iron ore, etc.), import dependence has increased from 5% in 1990 to more than 50% in recent years. China pays huge amounts, but the return remains very low. “Excessive inputs and poor outputs” is the typical extensive development mode.

The crystalline silicon PV industry mirrors this. Due to the rapid development of overseas markets, especially the EU market, China’s polycrystalline cell producers increased in number to more than 100 in a short time. In the 1980s, the annual production capacity of polycrystalline silicon in China was only 350 tons. But according to a survey of more than 50 polycrystalline silicon producers worldwide conducted by Solar&Energy, an energy market research institute, the total output of China’s polycrystalline silicon will reach 165,850 tons in 2013, ranking first in the world. Silicon raw material is a kind of mineral resource. Despite increased investment, the output value of cells still keeps falling with the decreased price.

Developing BIPV will change this situation. With low energy consumption, zero pollution, flexibility and good weak-light performance, thin-film cells are gradually replacing crystalline silicon cells in BIPV applications. Although rooftops can be installed with both crystalline silicon cells and thin-film cells, facades and other building components are only suitable for these thin-film cells. Because the facades are not exposed to sunlight at right angles, only installing thin-film cells can ensure power generation under such weak light conditions. Building components such as curtain walls and glass windows can only adopt thin-film technology, because these have to be light and translucent. The current thin film technology is the second generation of such technology, and it belongs to the sphere of high-end technology. Replacing crystalline silicon with thin film is both a technological upgrade and a shift in the development mode.

Role three: developing the PV application market will help achieve the goal of energy saving and emission reduction. Before the Copenhagen Conference, China had made specific commitments on emission reduction: by 2020, carbon dioxide emissions per unit GDP must decrease by 40% to 45% compared with those of 2005. It requires tremendous effort to cut such an amount of carbon dioxide emission in such a short time. It is estimated that if China popularizes BIPV nationwide, then carbon dioxide emissions will be reduced by 18%, around 1.3 billion tons, annually.

We must recognize that it is economic transformation and energy constraints that urge China to choose PV. In the new energy revolution, China must be able to make a difference.

China’s Unique Growth Pattern

China’s solar PV industry has “ten advantages,” among which strategic advantage and the opportunity advantage are the most important. Taking thin film and flexibility as its strategic direction, and boasting of world-leading technologies and enterprises, China has grasped the opportunities offered by the new energy revolution and the third Industrial Revolution.

The “China model”—with its unique and relatively efficient system and positive policies—becomes the third important advantage. Since 2012, the Chinese government has made rapid moves to introduce favorable PV policies, enabling the troubled Chinese PV industry to find its way out of its rut at last.

Strategy, Opportunity and the “China Model”

I am a veteran who has been fighting in the new energy war for more than two decades, but I am also a CEO who is increasingly confident about the promising solar PV industry.

Nevertheless, I am more like an orator sometimes: I introduce the development strategy of this industry to government officials and experts; I convince my counterparts to develop thin film as I do; and I popularize our corporate mission and the significance of engaging in the PV industry among my employees.

On several different occasions, I have publicized the “ten advantages” of developing the solar PV industry in China—namely strategic advantage, opportunity advantage, institutional advantage, policy advantage, market advantage, industrial advantage, technological advantage, talent advantage, capital advantage, and cost advantage—all detailed below.

As for the strategic advantage, I have mentioned it before to some extent; the European Commission is grappling with the economic crisis; the US is developing shale gas; and both are losing their strategic direction to some degree. Japan and South Korea have their own limitations. Only China, the PV manufacturing powerhouse, is qualified to be a strategic PV leader. Through the integration and upgrading of the polycrystalline silicon pattern, China has understood that thin film and flexibility are the right direction and the general trend of global PV development. In addition, China owns leading technologies and competitive companies in this regard.

For the market-and-industry, technology-and-talent, and capital-and-cost advantages, I am going to provide details in the succeeding parts of this chapter. Here I will focus on the institutional and policy advantages.

The institutional advantage refers to how China’s institutions and mechanisms are unique and relatively efficient. The policy advantage indicates that the Chinese government encourages the real economy by releasing favorable and effective policies. The underlying reason is to promote rapid economic growth in the context of the China model.

Since the reform and subsequent opening up, China has achieved rapid economic growth. All its tremendous achievements can be attributed to an unprecedented growth model, the China model, which successfully combines traditional market mechanisms with macro-level control.

There are numerous varieties of Western economic theory, which can be classified into two main schools: one is against government intervention, and believes in completely relying on the market to solve problems; the other, notably Keynesianism, admits the market’s role in problem solving, but believes that the government can and must intervene appropriately. Putting the academic debate aside, we find in reality that economic intervention by the government is essential. The question is how to intervene. The fact that the US tided over the 1929 economic crisis is generally recognized as a good example of President Roosevelt using Keynesian economic theory to governmentally intervene during an economic crisis. Since the outbreak of the financial crisis in 2008, President Obama has been forcefully intervening where he deems necessary. It is true that in this new energy revolution also the government needs to strengthen its guiding role.

Being inconsistent with Western free market economics, the China model is questioned by some people, because the Chinese government is often regarded as the only authority in China. However, “authority” can be an advantage as long as it plays an active role. Besides, the China model is market-oriented, which means that the market decides resource allocation, and then the government exerts macro-level control.

Since the 1990s, by relying on macroeconomic regulation and control, China has weathered economic overheating in 1993, the insufficient domestic demand and Asian financial crisis of 1997, as well as the global financial crisis in 2008. Over those years, China has maintained its rapid and sustained development. In 2012, the key to the quick recovery of China’s ailing PV industry was also that the government played a good guiding role again.

The features of the new energy revolution determine that its evolution is different from general economic activities. The biggest difference is that the government must strengthen its leading role while following the laws of the market economy. If there is no helpful guidance from the state and government, and if China lets the market take its course without any checks or balances, it will be hard to make any kind of a breakthrough. No country in the world is an exception.

China’s economic system determines that it’s easy for the China model to converge with the new energy revolution.

When the “group crisis” of China’s PV industry erupted in 2012, many people focused on the interaction between the government’s role and the market mechanism. Some believed that overcapacity in the PV industry was related to some local governments’ “offside,” and that it was the deep involvement and excessive support from the local governments that caused PV to overheat. Others said that this was due to the government’s lack of such influence. For the whole industry, the government lacked appropriate planning and guidance. Given the potential risks of the model relying on extensive expansion and foreign trade, the government failed to exert control or to provide guidance in a timely manner.

These views seem reasonable, but do not truly get to the heart of the matter. They fail to fully understand the unique and relatively efficient features of China’s institutions.

In China’s energy sector, whether it is primary energy or secondary energy sources, whether it is sole proprietorship, joint-stock companies or listed companies, most firms are controlled by state-owned capital interests. Some think that such ownership is potentially detrimental to the energy revolution. On the contrary, the essence of state ownership is that all the people are the ultimate owners and shareholders. Although the state-owned companies should strive for more profit for themselves, their fundamental purpose should be to lead the sustained and healthy development of the national economy, and to safeguard both the national economy and people’s livelihood. Such entities in the energy economy, as a part of its basic make-up, should not block the new energy revolution just for the sake of their own vested interests, because the revolution will benefit the long-term development of the entire national economy. Those entities should become active participants and main forces in the new energy revolution.

From a practical point of view, the ultimate decision-maker for state-owned enterprises is the government. They must comply with the policies and directives of the government. For example, on October 26, 2012, the State Grid, which monopolizes the transmission, distribution, and sale of electricity, issued the Opinions about Providing Good Grid Connection Services for Distributed Photovoltaic Power Generation. The quick and favorable response of the State Grid proves my point.

The Chinese government is able to “concentrate power to do something big.” This provides a good institutional environment for China’s new energy revolution. That is China’s institutional advantage.

Now, let us discuss the policy advantage. Policy is an important engine for the PV revolution. In November 2011, Hanergy invited experts from various fields to discuss how to promote the new energy revolution in China. At the end of the meeting, a senior expert concluded, “Now everything is prepared except one thing. The ‘thing’ is policy.”

Starting a project needs more power than just running it. The new energy revolution is no exception. When summarizing the development of the European PV industry, I mentioned that their PV industry has successfully gone through a subsidized “infancy” and entered the growth stage of market operation. China’s PV industry is in such transition, and really needs policy support.

At present, China’s PV industry is like a car that is climbing up a hill. The slope is so steep that the car cannot make it even if it goes full steam ahead. If the passengers help push the rear, the car will get on the flat road, and the passengers can then enjoy being carried forward. If the government pushes the climbing PV “car” with its policy decisions, then it will enjoy the economic and social benefits brought by a developed PV industry.

The so-called “policy in place” is not to simply develop a specific policy, but to solve a series of problems, and to establish an inter-consistent policy system. For example, how should finance, tax and price play a leverage role to ensure the healthy development of this industry? How should we determine policy priorities so as to ensure good performance in production, construction and application? How should China deepen the reform of the power system and adjust the relationship between power generation and grid connection, so as to realize a seamless docking between new energy enterprises and traditional energy giants?

Fortunately, China’s power system has taken a big step in promoting large-scale grid connection of new energy power generation (such as solar energy), especially in the construction of distributed power plants. Many insiders have begun to prioritize the development of a “smart grid.” In many pilot areas, PV power plants have started to try cooperating with the State Grid. These things show that the policy advantage is an integral part of China’s PV development.

The national policy of encouraging the development of the real economy is also a strong pillar of support for China’s PV industry. The year 2012 was not only a troubled year for this industry, but also a poor year for China’s real economy at large. Medium- and large-sized industrial enterprises maintained negative growth in profits until September, when the national policy of stabilizing growth took effect and those enterprises started to turn a profit at last. It is clear that the government introducing various incentives for the real economy can have significant effect.

China’s macroeconomic policy in 2013 was to highlight restructuring, to safeguard and improve people’s livelihoods, and to focus on expanding domestic demand, creating more opportunities and a more relaxed environment for the real economy, effectively dealing with the important issues involving people’s livelihoods. The CPC Politburo meeting proposed: “We must prioritize the quality and efficiency of our economic growth.” This injunction puts more emphasis on the quality of growth rather than its speed, while the quality of growth largely depends on the sound development of the real economy.

In June 2013, when chairing a State Council executive meeting, Premier Li Keqiang also pointed out that financial institutions would serve the real economy better by optimizing the allocation of resources and making good use of both existing and additional monetary and financial resources. He also said that financial institutions should strengthen their credit support (especially for advanced manufacturing, strategic emerging industries, labor-intensive industries and service industries as well as the upgrading of traditional industries).

Enterprises are the dominant force for developing the real economy. Making a profit is the goal and responsibility of entrepreneurs. The first impetus to attract more investment in the real economy is to enable enterprises to profit from the real economy and gain higher ROI than from the virtual economy. The government should appropriately channel and allocate market resources through structural tax and other policy tools. On the one hand, the government can strengthen support for real industry, maintain industry’s enthusiasm, and create a favorable development environment for the real economy; on the other hand, it can create a new security mechanism for production factors, prevent raw materials, resources, labor and other elements from overlapping, and thus increase profit margins.

All these favorable conditions should drive China to maintain its leadership in the PV industry.

The “Visible Hand” Has Made a Move

As we know, the economy has two hands. The market is the “invisible hand,” and the government is the “visible hand.” An economy that only uses the “visible hand” is a planned economy. An economy that rejects the “visible hand” belongs to the school of economic libertarianism.

The market economy mainly depends on the invisible hand to allocate resources. However, it is wrong to say that the visible hand is useless or cannot be used altogether. The two hands have different roles and strengths in dealing with various economic problems at different stages of economic development. In economic crises, it is difficult to recover by entirely relying on the market mechanism itself, and it is better to depend more on government intervention to resolve economic problems. When an industry is in its infancy, the best development opportunity may be missed if it relies totally on the market mechanism. It needs the “visible hand” and policy support from the government to live up to its potential and so play a bigger role.

China’s PV industry is a new emerging industry that could affect the economic development of the whole country, and its smooth development not only needs the help of the powerful invisible hand, but also asks for the visible hand to provide strong policy guidance, industrial protection and even diplomatic support. It is encouraging that the visible hand has made a move and come out to strongly support China’s PV industry.

For China’s PV industry, the year 2012 was a cold year, but a turning point as well. The state issued a series of regulations and supportive policies.

On May 23, 2012, the State Council executive meeting proposed to “support the use of self-contained solar energy products in public spaces and households.” On September 12th, the state issued the 12th Five-Year Plan for Solar Energy Development, expanding the installed capacity of PV power generation from 21GW up to the range of 30GW to 40GW. As one of the industry’s most important financial backers, China Development Bank also proposed further strengthening financial and credit support for healthy development of the PV industry. On September 14th, the National Energy Administration issued the Notice on Applying for Large-scale Usage Demonstration Area of Distributed Solar PV Power Generation. On October 26th, the State Grid issued the Opinions on Providing Good Grid Connection Services for Distributed Photovoltaic Power Generation.

On November 9th, the Ministry of Finance, the Ministry of Science and Technology, the Ministry of Housing and Urban–Rural Development, and the National Energy Administration jointly issued a notice about launching a second round of Golden Sun and Building Integrated PV demonstration projects in 2012, so as to support the technological integration and application demonstration of PV-generation-oriented micro-grids. The government would provide financial assistance in accordance with investment. The notice also encouraged the installation of PV power generation systems in schools, hospitals, communities, public buildings and the like. Various regions were told to choose whether or not to apply for projects that qualified for the investment grants, and to try out electricity subsidies.

On December 19th, former Premier Wen Jiabao held a State Council executive meeting to discuss policy measures for the healthy development of the PV industry. The meeting identified five major measures: accelerating industrial restructuring and technological progress; regulating the industrial development order; actively developing the nation’s domestic PV market; developing favorable policies; and giving full play to the market mechanism, reducing government intervention as well as prohibiting local protectionism. The conference was to become a milestone in the development of China’s PV industry. It also indicates that China will never be satisfied with merely helping to develop the PV industry, but has put this industry in a position of paramount importance within China’s entire energy strategy, and its national economic strategy.

In 2013, the national policy continued to strongly support the development of the PV industry.

In February 2013, the State Grid issued the Opinions on Providing Good Grid Connection Services for Distributed Power Supply. This document extended the service for distributed PV power generation to all types of distributed power supply, launched specific measures in this regard, including strengthening the construction of supporting grids, optimizing grid-connected processes, simplifying the procedures for grid connection as well as improving service efficiency, and also provided green channels and favorable conditions for grid connection.

On June 14th, one important item on the agenda of the State Council executive meeting was to discuss the status of the PV industry and make a breakthrough. On July 15th, the State Council issued Several Opinions on Promoting the Healthy Development of the Photovoltaic Industry, which became a programmatic document for the development of the PV industry. This document once again aroused the enthusiasm and hope of the whole Chinese PV industry. Within six months, the State Council executive meeting had discussed the same industrial issue twice, which fully demonstrated the importance of the PV industry.

On July 24th, in order to implement Several Opinions on Promoting the Healthy Development of the Photovoltaic Industry as issued by the State Council, the Ministry of Finance issued the Notice on Subsidizing Distributed Solar PV Power Generation according to the Quantity of Electricity and Related Problems, identifying specific measures in this regard. In August, the National Energy Administration released the first list of 18 distributed PV demonstration areas covering seven provinces and five cities. On August 22nd, the National Energy Administration and China Development Bank jointly issued the Opinions on Supporting the Financial Services for Distributed Solar PV Power Generation, to financially support the PV industry.

On September 30th, the National Development and Reform Commission issued an extremely important document, the Notice on Improving the Healthy Development of Solar PV Industry by Utilizing the Price Leverage. It said that according to the different levels of solar radiation in each region, the feed-in tariffs for new ground-mounted PV plants were classified into bands of 0.9 yuan/kWh, 0.95 yuan/kWh and 1 yuan/kWh. In addition, all the electricity generated by distributed solar PV power plants is to be subsidized at 0.42 yuan/kWh.

These policies pointed the way for the development of China’s PV industry. In the gradual improvement of this industry, the visible hand continues to facilitate the development of China’s new energy industry, especially the PV industry.

Advantage Element 1: Huge Market with Generous Funding

The capacity of the Chinese PV market outruns imagination. Reports say that China consumed 4.69 trillion kWh of electricity in 2011. If solar power plants can generate electricity for 1,300 hours each year, a total installed capacity of 3,608 GW could meet consumption demand at 2011 levels. However, China’s installed capacity of solar energy was only 8.2GW in 2012.

The potential direct scale of China’s BIPV market is worth about 10 trillion yuan, which is three to five times bigger than China’s automobile industry, and it can contribute 30 trillion yuan to national economic growth.

Over the past 30 years, China has maintained an average growth rate of 9.8%. In the next 10 to 20 years, China is expected to keep growing at 7% to 8% per year. By the end of June 2013, the total deposited yuan balance exceeded 100 trillion yuan, and foreign currency reserves reached USD3.5 trillion.

The Huge Market Worth 30 Trillion Yuan

In the vast Gobi area in Qinghai Province, the PV power plants along China’s National Highway 109 look quietly spectacular. Against the background of snow-capped mountains under the winter sunshine, rows of dark blue PV panels are dazzling.

Qinghai Province was chosen by China’s State Council as the experimental base for PV power plants. Construction of PV power plants is well underway in the plateau. On the Golmud plateau, you can see thousands of workers constructing plants around the clock.

Qinghai’s leadership is quite visionary. The first concession in the PV power generation project was in Gansu Province rather than in Qinghai. However, in May 2011, a well-known story circulated in the industry, saying that the Qinghai provincial government was unofficially promised that PV power plants which were connected with the state grid prior to September 30, 2011 would be subsidized to the tune of 1.15 yuan/kWh. This was known as “Project 930” among industry insiders.

At that time, the cost of PV power generation had been reduced to less than 1 yuan. That means the profit margin for generating 1kWh of electricity is 0.15 yuan, and the return is as high as 13%. Earlier, 26 companies had registered their local branches and conducted market investigation and research. Although many companies had signed letters of intent, few companies had made final deals and most of them still took a wait-and-see attitude. By the end of August, the total installed capacity was less than 0.04GW. After all, the on-grid price of 1.15 yuan was just an unofficial quote from the Qinghai provincial government.

Two months later, the National Development and Reform Commission (NDRC) announced the on-grid tariff, which was precisely 1.15 yuan. It meant that “Project 930” and the on-grid prices of Qinghai Province were approved by the NDRC.

When Hanergy was invited to invest in Qinghai in July 2011, there were more than 30 PV companies there. In 2011, the incremental grid-connected PV capacity in Qinghai was 1.003 GW, accounting for 50% of the total installed capacity of the country, and it was almost twice as high as the 0.53GW of newly installed capacity nationwide in 2010.

This is a story about a PV pioneer in western China; the kind of story that is now spreading from Ningxia to Gansu, from Inner Mongolia to Xinjiang and Tibet.

Solar energy development in western China is a microcosm of the huge Chinese solar PV market.

Through an economic lens, China’s scale keeps expanding, and the demand for energy will definitely continue to grow. On March 19, 2013, China’s economist Cheng Siwei said at the Fifth International Petroleum Summit that China was facing multiple challenges in energy supply, price volatility, and environmental problems. The global economy grows at 4% and energy consumption increases by 2.8% annually. Over the next decade, if China keeps an average 7% growth rate, it will likewise consume more energy at an annual increase of about 5%.

From the perspective of energy mix and distribution, China’s energy shortage cannot be fundamentally addressed by solely relying on energy imports and such major projects as the West–East power transmission project and the West–East natural gas transmission project. China must substantially replace fossil fuels with solar energy. Solar PV energy will gradually replace fossil fuels and plays an indispensable role in the new energy revolution. In 2011, China’s total power consumption was 4.69 trillion kWh. If the solar power plants generated power for 1,300 hours each year, China’s consumption would require a total installed capacity of 3,608 GW.

I believe clean energy will account for 50% of the total primary energy mix internationally by 2035. China had an installed solar capacity of only 8.2GW in 2012. Clearly, it is a huge market with promising potential.

The general guideline for China’s PV power plants emphasizes a gradual transition from centralized PV generation to a distributed generation model. In the future, distributed power generation will be the mainstream, and large-scale centralized power generation will only be a supplement. However, at the beginning of the third Industrial Revolution, large-scale centralized power generation is still necessary. PV power generation, as the main force and pioneer of the new energy revolution, will be indispensable in the replacement of fossil fuels. In 2010, China’s investment in clean energy reached USD 54.4 billion, making it the largest in the world followed by Germany’s USD 41.2 billion and the US’s USD 34 billion. In the same year, the newly installed PV capacity in China realized a year-on-year increase of 66%. According to Goldman Sachs and some other research institutions, Europe has represented 70% of the global PV market in the last few years, but China is expected to be the world’s largest solar market soon.

Another major marketable application for such technology is mobile energy terminals.

Imagine this: in his warm tent somewhere on Mount Everest in 2030, Mike is browsing on the Internet to check global ranking in solar radiation—the sunlight that powers PV technology. He found that Tibet, China, ranks second, and the Sahara Desert is first. The laptop that Mike uses is thinner and lighter than Apple’s current tablets, and it needs no external power supply. His laptop can independently and continuously power itself by utilizing solar radiation. With the most advanced flexible thin-film solar technology in the world, the thin film can be easily bent to any shape he desires. The tent is also designed to function as a solar power plant that provides power for his electric blanket. When Mike gets out of his tent, he won’t feel cold in snowy or windy weather, for his clothes are functioning as small solar power plants as well.

There will be a wide range of solar products, such as solar stereo, solar tents, solar watches, solar mobile phones, solar computers, solar fax machines, solar printers, solar lamps, solar cups, solar microwave ovens, solar ovens, solar hats, solar doorbells, solar monitors—and these are just the tip of the iceberg. For instance, a solar table would look like an ordinary table with a flat glass top, but that top is actually a piece of thin-film solar panel. Under the top, there are several plugs in the corners for charging mobile phones, computers, and other household appliances.

Mobile energy terminals are expected to push solar PV energy into becoming the ultimate substitute. Who will be the main consumers during this replacement process? They are the generations born in the 1990s and the 2000s. This process will be a process that pushes the third Industrial Revolution from the burgeoning stage into a golden era. This process will see us witnessing the younger generations taking a place of dominance in the world. Their values will determine the historical processes of the third Industrial Revolution.

“High technology, large scale, wide application” are the prerequisites for the development of the PV industry. “Wide application,” or a huge market, is the most important one because high technology relies on large-scale manufacturing, which in turn depends on a big market to generate profits.

Investing in The Photovoltaic Industry

Over 30 years since China’s reform and opening up, China maintained an average annual growth of 9.8%. In the next one or two decades, China could maintain a growth rate of 7% to 8%. Some institutions have predicted that China will surpass the US in terms of GDP, becoming the world’s largest economy by 2025 or 2030.

The underlying reason for this prediction is simple: being in the mid-to-late stages of industrialization, and in the middle of rapid urbanization, China’s economy is still in the prime of its adolescence. China is a big country with vast territory and a large population of nearly 1.4 billion. It has the most abundant labor resources on the planet, and is highly competitive in global manufacturing. More importantly, it has the most potential and the most promising domestic market. Being a PV latecomer is a kind of advantage, and by settling the matter in one go, China can directly introduce the most advanced technologies in the world.

When the 2008 financial crisis broke out, some people were worried that there would be turmoil in China. However, China firmly disagreed with that hypothesis, for the fundamentals of China’s economy remained unchanged. Over the past few years, the repercussion of the financial crisis could still be felt. Subsequent to the European debt crisis, the world economy has yet to return to its past vigor. Within this context, the Chinese economy still maintains a growth rate of 7% to 8%. The 18th CPC National Congress set two goals for the period from 2010 to 2020: doubling the GDP and the per capita income. To achieve this, China’s economy has to maintain an average annual growth rate of above 7.6%. These are China’s economic fundamentals.

China has an investment-driven economy. The destination of investment relates to current GDP growth. Furthermore, it influences the long-term, healthy and sustainable development of China’s economy.

Since the outbreak of the international financial crisis, China has implemented a proactive fiscal policy by injecting 4 trillion yuan into infrastructure construction, including railways, roads and airports. As a result, the country’s GDP increased by over 8% in 2009. However, this momentum was maintained for just one year before slumping into a continuing decline. During April and May 2012, China increased its investment again. Some regions even called for “working hard for one hundred days, investing heavily and constructing massively to achieve greater prosperity,” but the results were not satisfactory. Although the fourth quarter of 2012 saw an increase of 0.9%, the first quarter of 2013 witnessed a decrease once again. Both the law of diminishing returns on investment in economics and the reality of the situation show that such short-term bailouts are losing their efficacy.

Real estate markets can attract huge investment and absorb vast amounts of capital. Although adjustment and control policies for the real estate market have been implemented for many years, no obvious effect is seen at all. It seems that the more policies are rolled out, the heavier the investment is. In May 2013, among the 70 cities in China, there was only one city that saw falling housing prices. The enthusiasm for real estate investment has maintained its momentum. According to the National Bureau of Statistics, over the first five months of 2013, the investment in real estate development was 2.68 trillion yuan, representing a year-on-year increase of 20.6% and only a slight symbolic drop of an increment of 0.5% if compared with the first four months of 2013. In addition, while that 2.68 trillion yuan was channeled into real estate development, there was more capital also injected into other investment activities and speculation that went to the second-hand (stock) housing market. High housing prices have become a hot societal issue. To curb soaring housing prices, the Chinese government has launched a series of policies to continuously and firmly contain investment demand, and dampen real estate speculation.

The automobile industry, especially in the premium car sector, has also been a hot sector for investment in the past few years. Since 2011, China has become the world’s largest seller of vehicles. Vehicle ownership has reached 100 million total vehicles. Considering the saturated car market in first-tier cities and the environmental pollution caused by vehicles, some big cities have placed limits on car ownership. The relevant overcapacity in the vehicle industry will greatly limit future investment there.

Which industries should absorb more investment? How should capital be allocated more efficiently? As previously mentioned, the new economic growth point in China’s transition period is definitely the emerging solar industry. The financial industry should serve the real economy, and focus more on supporting the PV industry.

Since the launching of anti-dumping and anti-subsidies duty investigations by the US and the European Commission, the most acute problem faced by Chinese PV companies is the financial issue. Because of inadequate cash flow, companies are confronted with huge financial pressure. It has been reported that the top ten producers of polycrystalline silicon in China had liabilities of more than 110 billion yuan. Financial institutions foresaw potential risks and cancelled loans to those producers. On March 18, 2013, the creditors of Suntech jointly submitted an application to the Wuxi Intermediate People’s Court for the company’s bankruptcy and reorganization. Meanwhile, LDK’s operating conditions at that time still had not gotten any better.

However, against the backdrop of the shrinking global market, the total clean energy investment in China reached USD 67.7 billion in 2012, making China the world’s renewable energy leader. The rapid development of the solar energy industry made relevant investment hit a record high with a year-on-year increase of 20%. Total investment surpassed that of the second player, the US (USD 44.2 billion), by more than 50%. With the government introducing a new series of measures, the growth rate of PV installed capacity could reach three digits in 2013, and this is just the beginning. According to government predictions, PV installed capacity will reach 40GW by 2015. If calculated as 8 yuan/watt, the total investment will reach 320 billion yuan.

In essence, the reason for the funding crisis caused by the anti-dumping and anti-subsidies duty investigations is that financial institutions are less than confident about the “having raw material imported and products exported” model which is adopted by some PV businesses. Feeling “something bad” is about to happen, institutions tend to pull back on lending.

The PV industry is both technology-intensive and capital-intensive. The investment at the outset is heavy, and the payback period is prolonged. Capital investment covers the entire industry chain—from plant construction and equipment-purchasing to raw material refining and purchasing, to the production and manufacturing of cells and modules, and finally to the construction and operation of power plants. The recovery of funds actually has to wait until the power plants start to generate electricity and collect bills. Any PV enterprises whose operations cover the whole PV industry chain have to be patient with the long period of cash flow. Even enterprises that are partially involved in the chain can also be affected and restricted by this issue.

In fact, China has adequate capital. Statistics released by the People’s Bank of China on July 12 of 2013 showed that China’s RMB deposits had hit 100.91 trillion yuan as of the end of June, exceeding 100 trillion yuan for the first time. Foreign exchange reserves had reached USD 3.5 trillion.

In recent years, Renminbi deposits have maintained rapid growth, surpassing 50 trillion yuan in May 2008, 80 trillion yuan by the end of 2010, and 90 trillion yuan in November 2012. In June 2013, RMB deposits increased by 1.60 trillion yuan. For the first half of 2013, total RMB deposits soared by 9.09 trillion yuan.

Besides healthy amounts of funding, China’s domestic liquidity is adequate. In June 2013, China issued 860.5 billion yuan of new loans. New loans amount to 5.08 trillion yuan in the first half year of 2013. Within the same period, aggregate financing to the real economy was 10.15 trillion yuan, up by 2.38 trillion yuan compared with the year before.

By the end of June 2013, China’s broad money amounted to 105.45 trillion yuan, which was a year-on-year increase of 14.0%, 1.8% lower than that of May, and 0.2% higher than that at the end of 2012. The year-on-year growth rate of narrow money at 9.1% was 2.2% lower than that of May, and 2.6% higher than that in June 2013, the end of 2012.

Advantage Element 2: Industry, Cost and Technology

China’s reform and opening up has brought unparalleled industrial and cost advantages to China’s PV industry, which make up the “reform bonuses” we are currently enjoying.

China has surpassed the US and the Europe in terms of its core competencies, which are represented by such technical indicators as conversion efficiency, cell production, and future installed capacity. China leading the world’s solar industry is a reality that is already on the horizon.

Reform Bonuses: Industrial and Cost Advantages

Internationally speaking, the low cost of China’s PV industry is a strong competitive edge. This cost advantage is due to China’s industrial environment—China is a huge manufacturer.

Around July 2013, a graph indicating a reverse of the global manufacturing pattern, together with two news stories, were widely spread on the Internet. First, HSBC Purchasing Managers’ Index^™ (PMI^™)² posted an eleven-month low of 47.7 in July, down from 48.2 in June, signaling a deterioration in business conditions for the third consecutive month. Second, according to the flash Market Euro zone PMI released on July 24, the index bounced to an 18-month high of 50.1 from 48.7 of June.

As shown in Figure 4–1, the Chinese PMI curve fell below the Eurozone PMI curve. This aroused market concerns and brought the advantages of China’s manufacturing up for discussion.

Figure 4–1 The PMIs of major economies in the world.

Over the past decade, globalization experienced in-depth development, and the global industrial structure went through a new round of massive and significant adjustments. In the developed world, new technologies that center on information have been adopted widely and led the industrial structure to become more technology-intensive, knowledge-intensive, and service-intensive. Institutional innovation, which is characterized by deregulation, enhanced competition, and free moving factors, provides more room for industrial development and global transfer of such. The idea of sustainable development, which is based on energy conservation and environmental protection, has been widely accepted and posited higher requirements for industrial adjustment to realize corporate social responsibility objectives. Industrial restructuring and upgrading has greatly contributed to the further optimization of this growth pattern. In developed countries, technological advantages and industrial competitiveness have been enhanced to reduce energy consumption and pollution emissions, and technology and added value have been prioritized to promote economic growth. For developing countries, the global industrial transfer is a perfect opportunity and a major challenge for their transformation from extensive economies to intensive ones.

In its more than 30 years of reform and opening up, China has seized the opportunity in international industrial transfer, actively carried out institutional reform and mechanism innovation, achieved magnificent growth when taking on such transfers, and became the world’s factory by replacing Britain, the US and Japan.

China has an abundant and high quality labor force. It has established a complete industrial chain and strong industrial bases, and nurtured a number of innovative leading companies whose creative capability, scale and brands are among the best in the world. China will prioritize development of the seven strategic emerging industries, such as new energy, biotechnology and the new generation of information technology. Thus, China is hopeful of making breakthroughs in major technologies, commercializing its major scientific and technological achievements, creating innovation clusters that possess international competitiveness, and gaining the commanding heights in emerging industries through leading technologies.

Taking PV cell production for example, we can compare China with the US, Europe and Japan.

Cell production capacity represents an economy’s PV strength in mid-stream solar manufacturing. In 2005, the production capacity of Japan was 0.762 GW, accounting for 46% of total global output, and ranking first in the world. The market shares of the European Commission (second) and the US (third) were 28% and 9%, respectively. However, by 2010, China’s solar PV production accounted for 47.8% in the world, replacing Japan as number one. The EU and Japan together took nearly 30% of the market share, ranking second in global PV production. The US, with a market share of 5.74%, took third position.

Along with this, the cost of Chinese cells and modules has been reduced so rapidly that it has become an advantage. In 2006, the cost of PV cells and modules hit USD 5.4/W. With the efforts of Chinese PV companies, the cost dropped to USD 1.79/W in 2009, USD 1.035/W in 2011, and USD 0.8/W in 2012.

The situation for international competition is obvious. With leading technologies and invincible large-scale manufacturing, China has formed the skeleton of a technological powerhouse. For the rest, it needs just the flesh and blood—marketable applications for this technology.

There is an argument that the center of global manufacturing is transferring to Southeast Asia where labor costs are much cheaper, while China’s demographic dividend is disappearing, and so the cost advantage will vanish correspondingly. I don’t think this view is credible.

The concept of human capital is broader than just the size of the labor force, as it places more emphasis on the “quality” of that labor force. It refers to “the stock of competencies, knowledge, social and personality attributes—including creativity, cognitive abilities—embodied in the ability to perform labor so as to produce economic value. It is an aggregate economic view of human beings acting within economies, which is an attempt to capture social, biological, cultural and psychological complexity as they interact in explicit and/or economic transactions” (Wikipedia). The growth of human capital mainly depends on changes in population, labor force, age structure, urban—rural structure, education, and the labor force participation rate, among other factors.

According to the “Long-Term Growth” Research Group conducted by the Development Research Center of the State Council, China’s human capital reached 41.3 trillion yuan in 2012, which was 1.64% higher than in 2011. The ratio of human capital stock to GDP is 1.31:1, which means, 1.31 yuan of human capital stock produces USD 1 of GDP. Among the driving forces of human capital growth, the size of the labor force contributes only a little. In 2012, China’s working-age population (ages 15 to 64) was 988.9 million, indicating a year-on-year increase of 0.4%, but its proportion in the total growth of human capital was only 24.3%. That meant the size of the labor force only contributed 25% to the growth in human capital. Meanwhile, the contribution rate of labor force growth to human capital growth is still decreasing. It is estimated that China’s working-age population was 992 million in 2013, rising 0.31% compared with that of 2012 and accounting for 20.1% in the total growth of human capital. Its contribution to human capital growth was 20%, which was significantly lower than that of 2012. In 2013, China’s human capital is expected to reach 41.9 trillion yuan, an increase of 1.53% over that of 2012.

In general, China’s stock of human capital has been growing since 1990. Despite the reduction in working-age population potentially slowing down human capital growth, it will remain a growing trend through increased investment in education and an improving urbanization rate over the next 10 years. Human capital is still important to China’s long-term growth.

As for part of the manufacturing sector witnessing “parallel shiftings” (manufacturing shifting to emerging economies and then re-shifting to developed countries), Li Yizhong, Deputy Director of the Economic Subcommittee of the CPPCC, told the media that we must take a realistic approach to analyzing the challenges we are facing. At present, China’s growth costs are on the rise and some of this is inevitable, such as labor cost and land cost. So it is quite normal that multinationals shift their production to areas like Southeast Asia, because it boasts lower manufacturing costs. “We shouldn’t panic. The quality of China’s labor force is better than that of the Southeast Asian countries. We are still competitive in terms of labor force.” In addition, a complete industrial chain is being formed in China. With good labor skills and advanced infrastructure, together with honoring and carrying out contracts in an efficient manner, China’s manufacturing will come to enjoy new advantages.

The “reindustrialization” proposed by developed countries will challenge and inspire China. China is still in the middle of the industrialization process. It will be time-consuming and arduous for China to realize industrialization by 2020. China must transform and upgrade: shift from the low end to the high end, extend from the manufacturing sector to the service industry, enhance and extend the industrial chain, increase these processes’ value and efficacy, get rid of the production mode of processing on order, constantly upgrade and become involved in the high value-adding areas such as designing and branding.

The output of PV products made in China ranks first in the world. It is reported that China’s export volume of solar cells and modules accounted for 64.2% of global PV product exports in 2012. More importantly, this large-scale manufacturing is based on high quality and low cost, and this advantage is getting more prominent. Relying on technological advances and operational improvements, the cost of China’s PV industry will fall at an unprecedented rate.

Years of exploration have allowed Chinese PV companies to find the right business model for their needs, which is one reason for their low costs. In general, if a company limits itself to the link of cell production, it will suffer from the tight relationship between cost and price. However, if the company’s businesses cover the whole industrial chain, it will have more scope to make profits through selling products and providing systematic services such as financing, designing, procurement, construction, grid connection, power generation, power plant operation, and long-term maintenance. In March 2009, QS Solar announced that it would build the country’s first universal-type PV power plant in Rudong Port, Jiangsu Province. The thin-film cells used in this power plant would be produced by the company, and the cost would be 60% lower than that of polycrystalline silicon cells.

In the past thirty years or more, the model of “Made-in-China” has endowed the PV industry with cost advantages. Why, then, does the Chinese PV industry lack competitiveness on the world stage?

Core Competency: Technological Advantage

Technology is the core competency in the PV industry. We recognize that China’s technological level is low compared to many developed countries. However, this conclusion is not accurate for the PV industry. In PV technology, China is not only a top power in the world, but also an international leader with many key technologies.

Through innovation, technology introduction, technology trade, and corporate M&A, China’s PV industry possesses the leading technology in the world. Since Hanergy acquired Solibro, MiaSole and Global Solar Energy, the Chinese PV industry now owns seven thin-film technological lines, of which three have the ability to compete with other world PV leaders, and the other four surpass the US, the Europe and Japan.

Jiangsu Zhongneng Polysilicon, which produces the main raw materials for solar cells, created the new process of “silane-FBR.” With this technology, product purity can reach 11N, but the cost is less than half of the modified Siemens process. This means that the Chinese PV industry enjoys more of a competitive edge over the US and Europe, with huge potential for further widening this gap in the future.

When Xi Jinping, then Vice President of PRC, paid a visit to Hanergy’s plant where thin-film solar modules based on silicon are made in Shuangliu, Sichuan Province, in August 2011, the plant had just finished construction two months prior. I was there as his tour guide for the plant. I told Vice President Xi that this world-leading production line was independently developed by China. It was also the world’s largest silicon-based thin-film cell project. Its annual production capacity could reach 0.3GW, and the photoelectric conversion efficiency of its cells could reach 10%. Xi urged us “to strategically prioritize the strength of independent innovation.”

Advantage Element 3: Entrepreneurial Spirit

People are the most important factor in achieving success. China has enjoyed the “demographic dividends” brought by its urbanization, and is proud of its people’s entrepreneurial spirit.

Currently, besides American companies still maintaining their strong tradition of having a pioneering and entrepreneurial spirit, companies in Europe, Japan and South Korea have adopted the mode of “CEOs + professional managers.” Most of those companies become less innovative, because they are rarely controlled by their founders. Meanwhile, the most noticeable feature of Chinese entrepreneurs is that they are playing the role of “founders + CEOs.”

The Mode of “Founders + CEOs”

The past 30 years is a period that witnessed the emergence of the Chinese entrepreneur. It is also a period when these Chinese entrepreneurs created miracles. Facing few opportunities, less demand and no favorable conditions whatsoever, Chinese entrepreneurs nonetheless made painstaking efforts to create opportunities, demands, and conditions. They started businesses from scratch and single-handedly created many economic miracles.

China’s PV industry has nearly one million employees, which is the world’s largest PV industrial army. Its backbone is the skilled workers and technicians who master the most advanced technology in the world. These technicians include both brilliant Chinese and foreign talent. More importantly, a number of outstanding entrepreneurs are leading this troop. I believe this is one of the key factors contributing to China’s leading position in the PV revolution.

The master of economics Joseph Schumpeter highlighted that the function of entrepreneurs is to innovate. He defined innovation as “the setting up of a new production function” that introduces the unprecedented “new combination” of inputs and production conditions into production systems. The rise of a country is often accompanied by the growth of a number of outstanding companies. For example, the rise of South Korea depended on a group of excellent companies such as Samsung and Hyundai.

On August 14, 2013, Michel Sidibe, the under-Secretary-General of the United Nations, visited Hanergy. He told me that his father taught him when he was a child that “A leader must embody three elements: vision, action and heart. Only by doing this, can one achieve success.”

Currently, besides the American companies still holding onto their strong tradition of pioneering and entrepreneurial spirit, companies worldwide (chiefly in Europe, Japan and South Korea) have adopted the mode of “CEOs + professional managers.” Most of those companies become less innovative, because they aren’t controlled by their founders. Meanwhile the mode of “founders + CEOs” is one of the most noticeable features of Chinese entrepreneurs. Hanergy is such a company. With a mode of “CEOs + professional managers,” many companies in Europe, Japan and South Korea lack much in the way of pioneering and entrepreneurial spirit, which is a far cry from the mode of “founders + CEOs.”

Liu Chuanzhi’s Story

China’s mode of “founders + CEOs” is a priceless treasure, of which I have a deep understanding. In September 2011, I accompanied the former Vice Premier Wang Qishan to participate in the Sino-UK Economic and Financial Dialogue. Because the meeting could not start on time, the guests had to wait one hour. During that time, I happened to meet the CEOs of a famous bank. To begin with, they looked contemptuous, because they did not know about the Chinese private enterprises attending, like Hanergy. After twenty minutes of talk, their attitude changed and they started to show great respect. Why did their attitude change? For me, it is not because of the large scale of Hanergy, but because those CEOs are professional managers. They lack entrepreneurial spirit and most of them are conservative, wanting the courage and determination to take risks. Their Chinese counterparts have weathered numerous challenges to thrive, and so will continue to move forward through any storm.

Liu Chuanzhi’s story is a good example. Known as the godfather of Chinese CEOs, Liu is the entrepreneur whom I respect the most. He is the archetypical founder and CEO.

Mr. Liu was born in April 1944. His paternal grandfather was a native of Zhenjiang City, Jiangsu Province. From 1961 to 1966, he majored in the radar department at the People’s Liberation Army Institute of Telecommunication Engineering (now Xidian University) in China. After graduation, he worked at the Commission for Science, Technology and Industry for National Defense. From 1968 to 1970, he was sent to a farm in Zhuhai, Guangdong Province. It was in 1968 that the IT (information technology) giant Intel was founded. From 1970 to 1983, he worked as an assistant researcher at the Foreign Equipment Laboratory in the Institute of Computing Technology of the Chinese Academy of Sciences (CAS). In his own words, he “had researched magnetic recording circuitry for 13 years.” From 1983 to 1984, he worked at the Bureau of Personnel of CAS. It was in 1984 that the Institute of Computing Technology began to reform. The researchers there had the chance to go into business. Liu thought this was what he really wanted, so he returned to the Institute.

Liu asked Zhou Guangzhou, former President of CAS, for the two cottages beside the janitor’s room, 0.2 million yuan of start-up capital, two partners and the title of deputy general manager. Thus was Lenovo quietly born, largely unnoticed.

With Liu at the helm, Legend Holdings has become a huge enterprise. In 2012, its total revenue amounted to 226.6 billion yuan, with total assets of 187.2 billion yuan, and 60,026 employees. Over those years, Lenovo has established five subsidiaries; Lenovo Group, Digital China, Legend Capital, Hony Capital and Raycom. In 2004, the Lenovo Group purchased IBM’s personal computer business and became an international company. Liu believed there were three important elements in managing a company, which are “establishing a team, designing a strategy, and nurturing leaders.” With his business ethics, Liu has trained a new generation of celebrity entrepreneurs and made the company a “family business without family members.”

I was quite impressed by Liu’s comeback.

From 1984 to 2001, Liu served as Chairman and President of Lenovo Group. In 2002, he was the Chairman and President of Legend Holdings, and also the Chairman of Lenovo Group. In 2004, Yang Yuanqing took the position of Chairman of Lenovo Group.

In the fiscal years 2008 and 2009, the annual loss at Lenovo Group was USD 226 million. When the company suffered losses for eleven quarters in a row, the Group announced in February 2009 that “Liu will return to the chairmanship” to turn the business around. The day after his comeback, Lenovo’s stock went up by 11%. According to the market value at that time, the market capitalization of Lenovo had increased by HK$3.3 billion.

During an interview, Liu said, “If your kid is playing on the street and a car is coming, what do you do? Do you worry that you may die in a car crash before you reach him? Lenovo is my kid and I am ready to help him whenever he needs me.”

After being Chairman of Lenovo Group again for 33 months, the 67-year-old chairman resigned from his position on the evening of November 2, 2011, but he continued to serve as the honorary chairman and a senior consultant. This shows Liu’s far-sighted strategic vision. During the nearly three years since his comeback, Liu always trained and endorsed Lenovo’s management, which was led by Yang Yuanqing, and set the tone of Chinese-market-oriented strategy to save the company. However, Liu did not interfere too much in specific operations, leaving enough space for the executives.

Liu said, “Having cooperated with each other for 20 years, Yuanqing and I have become one part of each other in businesses.” He believes, “Yang is fully competent to be the chairman and CEO. He will lead the Group to fly higher and to be known by the rest of the world.” That night, Lenovo Group announced its second-quarter performance as of September 30, 2011. The data showed that global PC sales of Lenovo had exceeded the average market growth for ten consecutive quarters. For eight consecutive quarters, the company had been the fastest growing company among the world’s top four PC manufacturers. With a high market share of 13.5%, it became the world’s second-largest PC brand. It was “the best moment” in the history of Lenovo.

Excellent Practitioners in the Chinese PV Industry

Hanergy is a private company adopting the mode of “founders + CEOs.” Michel Sidibe, Under-Secretary-General of the United Nations, is the person in charge of global AIDS prevention. He has visited many companies and met with many well-known entrepreneurs, but he was most impressed with his visit to Hanergy. He said it was at Hanergy that he saw people “with vision, action and heart.”

Hanergy is undoubtedly forward-looking and strategic. When we built the Jin’anqiao Hydropower Station and joined the team to develop the thin-film solar industry, I had a strong feeling that we could make it.

The construction of the Jin’anqiao Hydropower Station lasted eight years, during which Hanergy faced unprecedented challenges, weathered difficulties, and achieved tremendous growth. The significance of its successful birth goes far beyond the construction itself. I often say, “We should work hard—it is then that God will help us.”

The Jin’anqiao project began in 2002. At that time, the United Front Work Department of CPC Central Committee and the All-China Federation of Industry and Commerce were jointly promoting the China Glory Society by organizing private enterprises to inspect Yunnan for further investment. When touring the Jinshajiang River, I learned that there were 100 million kilowatts of hydropower resources waiting to be developed in Yunnan, and the provincial Party committee and government were expecting private capital. I thought this was a historic opportunity, and immediately decided to invest one billion yuan to carry out a feasibility study of hydropower projects in the middle reaches of the Jinshajiang River basin. Our efforts were highly recognized and well supported by the Yunnan provincial government. They soon signed a preliminary feasibility study agreement with us. Later, on September 29, the two sides signed the Investment and Development Agreement of Jin’anqiao Hydropower Station. The project investment was 20 billion yuan. Its two phases of construction would have a total installed capacity of 3 million kilowatts, of which 2.4 million kilowatts went to the first phase. The project also became both the first and the only hydropower project with an installed capacity of more than one million kilowatts constructed by a private enterprise.

The necessary investment in the hydropower industry is heavy, and the payback period of capital is long. A project worth tens of billions will not see any economic benefits in the short term. Few private enterprises involve themselves in such a project, and only state-owned enterprises with their strength and governmental support are capable of making such a commitment. For example, the total installed capacity of the Gezhouba Water Control Project is 2.71GW. The project began construction in 1971, spending as much as the nation can bear, and taking 16 years to complete.

Hanergy is such a little-known private enterprise that people would be sceptical about whether it depended solely on itself to build a hydropower project whose total installed capacity is 10% larger than that of the Gezhouba Project. Some said I was crazy. Some thought Hanergy was making a profit by outsourcing the project. And some State Council officials, on the other hand, supported us and gave us an opportunity. Within the company, I eventually persuaded everyone to immediately start work on the Jin’anqiao project. I firmly believed it was the project that I wanted to do. More importantly, I was sure that with our experience in the hydropower business we would be able to make this project a success.

The challenges went far beyond my expectations. The construction lasted for eight years. The heavy investment per day was like a huge millstone, pressing me to death. In order to deal with the 10 million invested per day in the peak periods of the project, Hanergy had to sell its best and profitable power plants built only a few years prior. Those plants embodied the great efforts of Hanergy’s best people. Among them the project I was most reluctant to sell was the Nina Hydropower Station in Qinghai Province. The Nina Station had realized grid-connection and generation when Hanergy acquired it with 1.2 billion yuan in 2003. At that time, the financial and real estate markets in China were booming. Many people advised me to sell the Jin’anqiao project and make quick and easy big money. Some powerful enterprises found me and offered attractive prices, but I declined them all. My insistence was not to merely fight for a power station with a capacity of 3GW, but for a principle. This principle was perhaps my faith in clean energy. The idea of “fighting for clean energy” has been ingrained in Hanergy’s people’s consciousnesses since then.

Persistence demands a high price. In its most difficult times, Hanergy invested all its risk provisions, which were saved up for years, in the Jin’anqiao Hydropower Project. However, the project was like a bottomless pit, impossible to fill. At last, we even borrowed money from our senior managers and their families to maintain investment. In 2007, a ministerial official said to me, “When Hanergy has lived through the challenges of the Jin’anqiao Project, it will be unconquerable.” Huang Mengfu, Chairman of the All-China Federation of Industry and Commerce, inspected the project and said, “The Jin’anqiao Project is a miracle of Chinese private enterprise.”

Our efforts bore fruit. On March 27, 2011, the hydropower station officially started grid-connected generation. Looking at the towering dam on the Jinshajiang River, the torrents rushing from the dam, and the high-voltage towers on the horizon, I was excited and my thoughts raced.

The construction took eight years, during which I deeply felt the difficulties a privately entrepreneur had to face. I also realized that governmental support was hugely important for our private enterprises. I even found that private enterprises were highly relevant to the country’s future. Serving the country with new energy and contributing to people’s welfare have become two of Hanergy’s missions.

Liu set the Chinese-market-oriented strategy for Lenovo Group, and Chinese PV companies did the same. They stood at the strategic intersection of choosing the road, the market, their companies should take. The Chinese market is a magic key to the door that a large fortune hides behind.

The majority of PV entrepreneurs are the owners of their companies. They have the following characteristics: first, they grew up in the context of China’s reform and opening up, so most of them are revolutionary, open-minded and far-sighted. Second, most of them are the founders of their respective businesses. They start businesses from scratch, oversee them growing strong, and experience various hardships. They become indomitable and dauntless in coping with various situations. Third, their success is closely related to national policies and the country’s development. Thus, they have a strong desire to serve their communities and their country. They take the idea of “strengthening the country and enriching the people” as their corporate mission.

Chinese entrepreneurs do not lack courage, strategic vision or innovative spirit. They need to defeat themselves and resist temptation. Here we quote a metaphor, “climbing Everest,” from Liu Chuanzhi. Liu always says he is living in a period when China lacks business culture, but he sketches out an Everest for himself and conquers it by his willpower alone. With strong determination, he has time and again reached each of his targets until he finally realizes his ambition.

China’s PV Companies

Over the past 10 years, if there is an industry whose halo is as bright as the one around the Internet, it must be the PV industry. If there is an industry that creates wealth as much as the Internet does, it must be the PV industry. If there is an industry whose ability to attract capital can compete with that of the Internet, it must be the PV industry.

But time flies when you’re having fun. The international PV anti-dumping and anti-subsidies duty investigations caused by the crazy expansion of PV capacity became the straw that broke PV’s back.

“Crisis” in Chinese means both “danger” and “opportunity”; that is, crisis represents opportunity. Reality has told us that the road of expanding production capacity and the mode of “having raw material imported and products exported” do not work anymore for the Chinese PV industry. This crisis is a perfect opportunity to change from following to leading, from capacity expansion to technological progress, and from disorder to healthy development.

The First Generation of PV Enterprises: The Rise and Failure of Crystalline Silicon

It was reported by Huaxi City Daily that on March 20, 2013, the Wuxi Intermediate People’s Court ruled Suntech to be bankrupt and so had to be reorganized, according to the Enterprise Bankruptcy Law. Similarly, the situation of LDK, an upstream company, was not particularly bright. However, it is undeniable that Suntech and LDK are two of the most vigorous companies representing this sunrise industry. They are known as the “two PV heroes.” These two companies were founded by Shi Zhengrong and Peng Xiaofeng, respectively, who are of the new generation of entrepreneurs. Shi and Peng with their companies played a model role in the earlier stage of the PV industry. In just a few short years, China’s PV production capacity accounted for more than half of the world’s, and among the global top-ten PV module producers, Chinese producers take the first five positions.

It was reported that when Shi Zhengrong, a 37-year-old doctor, returned to China from Australia in 2000, he arrived at Wuxi with only a laptop and a business plan of no more than a few pages. According to Hong Yuqian, general manager of Wuxi Venture Capital Group Company, Ltd., Shi presented his business plan to Hong and several officials from the local technology bureau in a governmental guesthouse near the Zhongshan Road in October 2000. “We felt the plan was risky. Domestic power demand was not high, and power generation was in overcapacity in 2000. We found there was no domestic demand for solar power generation. In addition, we knew nothing about the overseas markets. We couldn’t know if it was a promising business plan.”

Hong, former Director of Wuxi Machine Tools Company, Ltd., had been a manager for ten years and later served as Deputy Secretary of Wuxi Municipal Finance Bureau. In 1999, the MOST launched a project to promote technological innovation, and Wuxi was one of the pilot cities. The Wuxi municipal government funded the establishment of Wuxi Venture Capital Group Company, Ltd. under its administration. Considering the financial operation risky, the local government appointed the just-retired Hong as the general manager. The collaboration with Dr. Shi was the first challenge for this company.

Hong took the business plan to the senior technicians of Wuxi China Resources Huajing Micro Co., Ltd for advice. This company was the largest manufacturer of integrated circuit chips in China. Its upstream raw material was silicon materials. Ten days later, Hong got the answer: it was a good high technology project, so it was commercially viable. But there was one uncertainty, that it might be a little early to invest immediately. Hong asked them, “Would you mind an investment with us?” They said they were not interested for the time being. In fact, many companies were not brave enough yet to engage in this sector.

In January 2001, Shi convinced the Wuxi municipal government to support his project. According to disclosed information, the registered capital of this company was USD 8 million, of which Shi accounted for 25%, and the technology shares accounted for 20%, equivalent to USD 1.6 million in total; the cash dividend accounted for 5%, equivalent to USD 0.4 million; the other USD 6 million was contributed by eight other shareholders, namely, Wuxi Venture Capital Group Company, Ltd., Wuxi High-Tech Venture Capital Co., Ltd., Wuxi Keda Innovation Investment Ltd., Wuxi Guolian Trust & Investment Co., Ltd., Little Swan Group, Wuxi Mercury Group, Wuxi Shanhe Group, and Shanghai Baolai Investment Management Ltd. The last five companies were corporate shareholders, among which the Shanghai Baolai Investment Management Limited had not invested and its shares were re-distributed among the other shareholders according to stock equity.

In September 2002, Suntech’s first solar cell production line of 10MW was officially put into operation. Its production capacity was equivalent to the sum of the whole country in 1998. Its operation had narrowed a fifteen-year PV gap between China and the world.

However, Shi did not stick with his thin-film strength, although he had been in charge of R&D in Pacific Solar Pty., Ltd. for more than six years. In light of China’s advantage in manufacturing, he turned to producing crystalline silicon cells.

In its initial stage, Suntech did not fare too well. According to the magazine China Entrepreneur, the sales of Suntech in 2002 were more than 10 million yuan, and the losses were over 7 million yuan. The situation worsened in early 2003: in order to get bank loans, the company had to mortgage all its property; and its start-up team fell apart. In August 2004, the third production line at Suntech started production as the company was suffering a severe downturn and even its equipment was pledged to the construction team.

Luckily, several major state-owned shareholders provided loans to Suntech in turn. In 2003 and 2004, Wuxi City also approved nine projects funded by the government for this company. The financial support totaled 37 million yuan. All that helped Suntech out.

It was in the month when Suntech’s third production line started operation that this unpleasant situation changed. The German government revised its Renewable Energy Law to subsidize solar energy and other new energies. Germany became the first country to consume new energy since the enforcement of the Kyoto Protocol. Germany’s demand for PV cells was boosted instantly and caused the 2004 global PV market to realize a year-on-year growth of 61%.

When most PV companies did not have enough appetite to swallow this piece of cake, Suntech suddenly saw an opportunity to reap the benefits from this new market. In 2004, its net profit reached USD 19.80 million. In the first three quarters of 2005, the net profit totaled USD 20 million. This time, Shi was quite keen and captured the subtle changes in the PV cell market. Even lacking funds, he was still brave enough to expand his production and eventually created his own success story.

On October 19, 2005, Suntech went public on the NYSE, raising USD 400 million. In the same year, Shi became “the richest man in China.”

Perhaps it was the demonstrative effect of Suntech making profits or possibly it was the increasing overseas demand that ultimately made PV the most prosperous industry in China. The PV industry quickly became regarded as the only high-tech industry in which China can compete with the rest of the world. In addition to Suntech, a group of celebrated companies has emerged. Some Chinese provinces and autonomous regions, such as Jiangsu, Hebei and Inner Mongolia, have prioritized the development of the solar PV industry. Nationally, there are at least ten PV companies with a scale similar to Suntech. PV producers, little and big, amount to nearly one thousand. The development of these companies is uneven, but their total capacity is amazing. Globally, little newly installed solar power capacity is annually about 29.79GW, while the PV module production of China in 2011 was 30GW, which is almost equal to the total global amount.

When China’s PV industry is in trouble, “the disadvantage of being first” will become the Achilles’ heel of the PV frontrunners. This is a capital-intensive industry. In order to gain advantage from being first, radical frontrunners are prone to borrow heavily to expand capacity. With this rapid expansion, the cost of equipment and raw materials is unexpectedly low.

When a Chinese polysilicon manufacturer commenced commercial production of polysilicon in 2008, the cost was USD 110/kg. When the company started its second phase of production in March 2011, the cost had dropped to USD 60/kg. If the cost could maintain itself at a level above USD 400/kg, frontrunners reasonably spend more than the latecomers do, because the former will make profits some day in the future. However, if the cost falls to USD 40/kg before prior investments are recovered, that spells big trouble. It is widely recognized that the cost of re-establishing LDK would be less than its debt.

This disordered and uncontrollable capacity expansion caused the international PV anti-dumping and anti-subsidies duty investigations, which became the straw that broke the PV Helios’s back. This was a predictable crisis, but the first-generation Chinese PV companies were not well prepared to deal with it. Facing the shrinking European market, those companies feel that it has become difficult to make progress.

The Second Generation of Solar PV Companies: Realizing the “Thin-Film Dream”

However, Chinese solar PV companies have not stopped exploring the industry’s potential. Based on the experiences and lessons of the first generation, the second generation of solar PV companies such as Hanergy and ENN blazed a trail in both the technology roadmap and the business model, and so created a new world for themselves.

It was in 2009 that Hanergy entered the PV industry. At that time, crystalline silicon technology was relatively sophisticated, while thin-film technology was still in development. Many insiders were optimistic about the crystalline silicon PV industry. Some even took it for granted that PV is crystalline silicon. Therefore, choosing a technology roadmap became a problem.

After careful consideration, Hanergy’s decision-makers decided that, as the solar PV industry is a strategic emerging industry, their decisions must be based on the nature of this industry. “Emerging” means the business is extremely promising. “Strategic” means it concerns both general and long-term interests. In the long run, thin film and flexibility are the development direction of PV technology. PV products based on crystalline silicon technology are energy consuming, heavy in weight, and rigid. Those shortcomings are difficult to overcome. PV products based on thin-film technology are energy saving, lightweight, as well as flexible, and perform well in weak light. In the future, solar energy will be inevitably applied to distributed power plants and various mobile power generation devices. Undoubtedly, the merits of thin film are more obvious. As for the photoelectric conversion efficiency and cost of thin film, these can be solved technologically. Moreover, the major business of Chinese PV companies was crystalline silicon-based production when Hanergy wanted to enter the field, so there was no need to become yet another face in a crowded industry. Due to lack of strength, some followers have to compete with products or services similar to others. Their outlook is certainly bleak. Thus, Hanergy decided to find a new way by employing the Blue Ocean Strategy. It resolutely chose the thin-film roadmap, which still got the cold shoulder in China.

Looking back, our choice was correct. The investigations imposed by the European Commission and the US were directed at crystalline silicon products rather than thin-film ones. For Hanergy, that oversight seemed like a stroke of luck. More importantly, thin-film technology did indeed develop as rapidly as expected. Within a few years, the conversion efficiency of thin film modules has increased to 18.7%, which is the same as, or even higher than, that of crystalline silicon, while the production cost is much lower.

Technological leadership is the key to developing PV enterprises. It is often said that excessive production capacity poses risks. In fact, it is not being large scale, but being large scale without enough of a market that poses risks. Products with low technology and high cost will have no market, so the key is technology. Having the most advanced thin-film technology in the world, Hanergy is braver and more confident than ever in rapidly expanding its capacity.

In 2012, the British Financial Times and the American Wall Street Journal reported Hanergy’s overseas acquisitions twice within five months. Reuters even published an interview (an article of about 5,000 words) with Zhou Jiesan, an executive of Hanergy Group, who was in charge of Hanergy’s overseas acquisitions. Those frequent reports from renowned international media outlets helped Hanergy attract more attention, both at home and abroad. The PV tide was going out and so provided a good opportunity for Chinese enterprises to pick “pearls.” “MiaSole’s deal with Hanergy would be the latest example of a US solar startup being rescued by a larger Asian industrial manufacturer.” Those comments had a strong flavor of Western style. The thing they cared about was not the little-known Chinese buyer from afar, but the two shining “pearls”—Solibro and MiaSole.

At home, once the state-run Xinhua News Agency and the 21st Century Business Herald reprinted those foreign reports, the domestic media and their websites flocked to report on Hanergy. This company came under the spotlight again.

The domestic media chose several points to highlight: What are these two companies? Why does the international media pay so much attention to them? What is the purpose of Hanergy’s acquisitions against a backdrop of anti-dumping and anti-subsidies duty investigations imposed by the EU and the US?

Abiding by relevant regulations and their contracts, Hanergy did not disclose any information to the public. The domestic media mostly just cited the aforementioned foreign reports. Several media outlets only based their articles on the views of individuals in order to analyze Hanergy’s motives. In contrast, the Reuters reports were more internationally focused. The agency noted, “The purchases also give Hanergy technology the ability to compete with First Solar Inc., the biggest maker of thin-film panels.”

First Solar was the then-current leader of the global PV industry. In 2009, it replaced Q-Cells to become the world’s largest PV company. In 2012, its module production capacity reached 2.5GW. First Solar is a thin-film-based company like Hanergy. Globally, it is the only company beside Hanergy that realizes the falling costs in the thin-film business. Cadmium telluride technology belongs to a branch of thin-film PV technology. First Solar has this technology and enjoys a technological monopoly with Antec Solar, a Germany-based cadmium telluride thin-film cell manufacturer. The conversion efficiency of cadmium telluride cells in tests has reached 17.3%, and the results have been independently confirmed by the US-based National Renewable Energy Laboratory (NREL). Some even say First Solar is America’s “national treasure.”

Hanergy treats First Solar as its most important competitor. In 2009, Hanergy decided to set a production target of 3GW for the end of 2012. If successful, it would surpass First Solar. At that time, more than half of its senior employees and executives did not believe Hanergy could make it, because the largest production capacity in China was only tens of megawatts. In December 2012, Hanergy announced that its target of 3GW had been realized.

So, what is the impact of Hanergy’s acquisitions (Solibro and MiaSole) on First Solar?

The first impact is the conversion efficiency. Solibro is the world-record holder in the conversion efficiency of thin-film solar cells. Its small-sized winner CIGS cell achieved the world’s highest efficiency of 18.7%. Of course, this is only a test result in a laboratory, which is to say, mass production cannot currently be achieved at such high conversion efficiency. So, what is the efficiency for mass production? Solibro has realized an efficiency of 14.7% in mass production. When the efficiency of solar cells is improved by 1%, the cost of solar power generation is lowered by roughly 8%.³

Solibro is a venerable company established in Sweden. Sweden is the research and development center of Europe. It spends 4% of its GDP (as opposed to 1.83% in China) on research, the highest among European countries. Solibro’s founders all graduated from Uppsala University, the oldest Nordic university and a paradise of learning. Imagine being neighbors with knowledge itself, and you will know the value of this university. CIGS technology was born in the Ångström Laboratory of the university in 1983. The leader of this technology was Lars Stolt (the incumbent CTO of Solibro), who therefore is known as the “Father of CIGS thin-film solar energy.” Later, with his colleagues at Uppsala University, Lars Stolt founded Solibro, which was acquired by the world solar giant Q-Cells in 2009.

The American company MiaSole is also a powerful competitor for First Solar. The conversion efficiency of its CIGS thin-film solar modules is 15.5% in mass production.

Located in Silicon Valley, MiaSole ranks first among the 200-odd local new-energy companies in terms of technical indicators and technological strengths. The members of its R&D team mostly come from Intel, the global giant of the computer industry. They embody the changes in Silicon Valley, where an energy revolution has replaced the information revolution, and are witnesses to the transformation of Silicon Valley into “Sun Valley.” John Doerr is the primary investor in MiaSole, and he is called “Bill Gates” by the investment community. He once invested in the computer giant Compaq and the Internet giants Google and Amazon. In the rising star of Silicon Valley, MiaSole, he also invested USD 550 million.

Why did Hanergy acquire two CIGS companies at the same time? The answer is “strategic consolidation of global technologies.” Hanergy selected 20 leading thin-film PV companies from the US, Europe, Japan, Israel, and mainland China, and conducted site visits. First Solar was among them and was ruled out at last, because its cadmium telluride technology emitted the toxin cadmium. Although relevant recycling technology exists, it did not fit with Hanergy’s concept of clean energy. Finally, five companies with different techniques became the final options for Hanergy’s acquisition. Although both Solibro and MiaSole adopted CIGS technology, the former used evaporation techniques, and the latter adopted a sputtering technique. Having a variety of techniques has two advantages: One is that diversified products can provide a wide range of application scenarios. For example, Solibro’s products are more rigid and MiaSole products are more flexible. The other advantage is that sharing patents can greatly promote technological progress. Currently, technology research and development is relatively conservative in Europe, the US and Japan. For example, First Solar exclusively monopolizes cadmium telluride technology. Meanwhile, the various techniques mastered by Hanergy can supplement and promote each other in an open environment. That is why we need to consolidate global technologies.

Maybe this is why the celebrated Western media paid such great attention to the two acquisitions. Actually, they knew little about Hanergy, which came from far away in the East. If they had known that the production capacity of Hanergy had reached 3GW at the end of 2012, they would perhaps make different interpretations about its acquisitions.

Drawing lessons from the first generation of PV enterprises and their mode of “having raw material imported and products exported,” Hanergy adopted a business mode of “building a high-end, large and complete product line.” “Being large” means production on a massive scale. In fact, Hanergy has consecutively established nine production lines for thin-film cells, and acquired three foreign companies. In addition, its production capacity in thin-film cells has come to be ranked first in the world in just a short time. Some would cast doubts, perhaps asking whether it is merely “blind expansion.” In fact, Hanergy has enough strength to do so, and it is permanently and strategically significant for this company to promptly seize opportunities and to expand capacity.

The PV industry is a marriage between the high-tech industry and the energy industry. The nature of the high-tech industry is its large-scale production. To lead in technologies requires increased investment in R&D, while the investment cannot be realized without financial strength. However, without large scale, there can be no financial strength. The leading high-tech companies are generally large enterprises. In 2009, when Hanergy was purchasing high-end equipment, I met with two enterprises. They were the Switzerland-based Oerlikon and the US-based Applied Materials. When they were told that Hanergy expected to realize a capacity of 3GW, they thought I was joking. Because First Solar, the world’s largest American PV company, had a production capacity of less than 2GW at that time. Those two companies did have advanced technology, but their costs were hard to cut due to their small scale. Later, one was purchased and the other left the thin-film field.

The nature of the energy industry is also its large-scale production. The energy industry covers every corner of society, so the sales of its products have to be massive. Energy products are basic commodities in economic and social development, so their price should not be as high as those of some consumer goods or luxury goods, and their benefits must come from “economies of scale.” The successful enterprises on the world stage are mostly large or super-large enterprises.

Therefore, since the PV industry was born as the result of the marriage of these two big industries, it must be large for both its survival and its development. This is why Hanergy increased its production capacity to 3GW as its first phase.

For Hanergy, this is only an initial pattern. Its aim is to reach a capacity of 20GW in 2015. Many people may think this is an astronomical figure, but in reality it is possible to achieve. Actually, the generation capacity of solar power plants is only equal to one-quarter of traditional power plants, so a solar installed capacity of 20GW is only equal to a hydropower installed capacity of 5GW. The current hydropower installed capacity of Hanergy has reached 6GW. If Hanergy can achieve the goal of 100GW in installed PV capacity by 2020, and if its thin-film PV production capacity accounts for one-quarter of the world’s, then we can say it’s big.

“Being complete” means a business covers the whole industrial chain. Unlike many solar PV companies’ businesses, Hanergy’s business extends from the production of cells and modules to the entire PV industrial chain. The upstream high-end equipment manufacturing, the midstream thin-film cell production, and the downstream power plant construction together constitute Hanergy’s “business model of the whole industrial chain.” Its business covers raw material exploration, technology R&D, equipment development and manufacturing, system designing, as well as the construction, management and operation of power plants. This kind of business model can give full play to Hanergy’s strengths in R&D, technology, manufacturing and engineering. It also can settle the conflict between photoelectric costs and business benefits.

Recently, knowing that Hanergy’s production capacity has reached 3GW, people will ask, “The market can consume such a large amount of capacity?” They do not know that Hanergy is essentially a power generator in nature. Its profits do not simply rely on manufacturing, but mainly depend on system solution services, solar energy applications and power generation.

Since its HeYuan Manufacturing Base (in Guangdong Province) finished construction on July 1, 2009, Hanergy has always synchronized its construction of solar power plants and production bases. The annual capacity of 3GW is not in surplus.

As early as 2010, when Hanergy had only been a part of the PV industry for two years, it incorporated Hanergy Holdings (America) Limited in San Francisco, and built two small-sized solar power plants, which have been in operation ever since. Those moves can be regarded as a springboard for Hanergy to enter the US market.

Coincidentally, another silicon-based thin-film company, ENN, signed a letter of intent with the State of Nevada at the China–US Economic and Trade Cooperation Forum in February 2012. This company intends to invest USD 5 billion in the state to build an eco-center of clean energy, including PV power bases and PV module manufacturing bases.

With its business model the whole industrial chain, Hanergy has promoted solar energy applications in various ways. In Italy and Greece, it provides distributed generation services for some commercial projects. In China, it tries to cooperate with famous businesses. For example, Hanergy and IKEA jointly launched a “green home strategy,” in which Hanergy will provide thin-film modules of 0.383GW and build distributed power plants for IKEA-owned Chinese stores and its 67 suppliers over three years. Once put into operation, those systems of distributed power generation will meet 15% to 20% of the annual electricity demand of the Chinese stores and all the electricity demand of IKEA’s Chinese distribution centers.

Previously, Hanergy’s household solar power generation system sold at IKEA UK had enjoyed popularity. I once paid a home visit to a British customer of mine. He told me that he spent 4950 pounds installing 25 pieces of thin-film panel (a 3kW solar power system), which can generate 3600kWh per year.* As a reward, he gets an annual subsidy of 576 pounds from the government and saves 261 pounds on his electricity bill (half of his own generation can meet his power demand). In addition, his profit on electricity sales is 81 pounds, for the surplus electricity is sold to grid companies at 0.045 pound/kWh. In total, he earns 918 pounds every year, equivalent to an annual ROI of 13%.

There is a long-standing dispute between “integration strategy” and “specialization strategy” in the PV industry. The “specialization strategy” focuses on one link and making it strong and superior. The “integration strategy” consists of the “horizontal integration strategy” and the “vertical integration strategy.” Horizontal integration is a consolidation of many firms that handle the same part of the production process, while vertical integration is typified by one firm engaged in different parts of production. The mode of the whole industrial chain is a kind of vertical integration. Theoretically, those strategies have their strengths and weaknesses. The key is whether strategies and enterprises “match.” According to its circumstances and understanding of the PV industry, Hanergy chooses the vertical integration strategy, which is a result of seeking a good “match,” and being “different” rather than making a statement that this is the only correct mode.

A business covering the whole industrial chain has its own issues, its own pros and cons, and risks. The most distinctive characteristic of this business model is that the links interact with each other within the whole value chain, and all depend on downstream sales for ROI, so it takes a longer time to see a positive cash flow. Without continued financing, the business is likely to give up halfway. Meanwhile, this business model requires companies to know precisely the status quo and trend of every link in a timely manner. Moreover, companies must be capable of appropriately handling challenges to prevent any mistake in the links from affecting the whole chain. The mode of the whole industrial chain indeed fails in some Chinese companies. Most are caused by lack of financing and making mistakes in some of the links.

The World Looks to China for PV

2013 will be the turning point in the PV application market in China. From this year onwards, China will completely shake off the label of being a “big nation in PV manufacturing, but small in application,” and transform into a powerful nation in both PV manufacturing and application. At present, China has been making mid- and long-term plans for PV development, and the disclosed figures are big enough to cheer up the PV industry. China’s PV industry will play a leading role in the world PV industry and then in the world energy revolution.

Leading the World in PV Application

China has been the world’s largest producer of PV products since 2007, and its share in the world market is rising year on year. Even after the US and the EU launched the anti-dumping and anti-subsidies duty investigations and raised market thresholds, China’s ever-expanding PV manufacturing advantage has not been lost. China’s PV cell production capacity reached 21GW in 2012, accounting for 63% of the world total. If we include Taiwan’s production capacity, this proportion is 73%, and so we can see that China truly lives up to its reputation as a big PV manufacturing nation.

2013 is the turning point because it’s expected that China’s newly installed capacity for PV power generation this year will be the largest in the world for the first time. In the past, 90% of China’s PV products were exported. However, since the PV feed-in tariffs scheme was introduced in 2009, the PV application market has been rising rapidly, and installed capacity in 2012 reached 8.2GW. According to market expectations, Germany’s newly installed capacity in 2013 will drop from 7.6GW to 5GW. In China, the National Energy Administration announced at the beginning of 2013 that it expected China’s installed capacity to reach 10GW. Judging from the current situation, China’s capacity will at least reach 6 to 8 GW, overtaking Germany and ranking first in the world.

Change always runs faster than plans. As for changes in the PV application market, China made many rather forward-looking development plans in the past, but eventually it turned out that we had underestimated the growth rate of the market. In July 2013, the State Council issued Several Opinions on Promoting the Healthy Development of the Photovoltaic Industry, which will significantly raise the total installed capacity in the PV market to 35GW. This means that in the following 3 years, there will be 10GW of newly installed capacity on average every year in China.

The government’s latest plan will improve China’s share of PV installed capacity in the world dramatically. By contrast, the capacity of the European market is plummeting. According to data from HSBC, the share of the European market in world total installed capacity will decrease from 68% in 2011 to 32% in 2013, and 25% in 2015. Meanwhile, China’s share will increase from 11% in 2011 to 27% in 2013, and remain at 23% in 2015, almost equal to that of Europe. China and Europe will become the two joint-largest PV application markets in the world.

At present, related institutions, entrusted by the National Energy Administration, are helping to draw up the PV development plan for 2030 and 2050, which will serve as guidance for decades to come. According to some sources, China’s PV capacity will reach at least 100 GW in 2020. This means that with the 35GW capacity installed before 2015 excluded, the average annual installed capacity will reach 15GW between 2016 and 2020. Between 2020 and 2050, there will be a substantial increase in domestic capacity. By then, China’s long-term planning for annual PV installed capacity in 30 years may be raised to 30 GW, which means the newly installed capacity per year will be equivalent to 30 units of 100 million kilowatts of thermal power units.

According to future energy demand forecasts, by 2030 China’s total energy demands will reach 7.5 billion tons of standard coal, and then renewable energy will play a huge role in substitution. According to the plan, by 2050 PV power generation capacity will reach 1 billion kilowatts. 1 billion kilowatts is equivalent to the current total installed power capacity in China. At the end of 2012, China’s total installed capacity was 1.14 billion kilowatts, which means that by 2050, these 1.14 billion kilowatts can be completely replaced by PV.

According to China’s existing reserves of resources, PV mid- and long-term planning also shows the necessity of large-scale PV development. With economic development, China and many countries in the world face the dual pressures of energy and economy. China is now the world’s largest energy consumer, largest electricity consumer, largest importer of coal, and largest carbon dioxide emitting country. As a major energy consumer, how much conventional energy do we have in reserve? As mentioned earlier, China’s reserves of coal and natural gas are only enough for the next 33 years, oil for less than 10 years. This means that in 30 years’ time, we will have no coal, oil or gas to use. For the sustainable development of China’s energy and for the sake of the environment, PV power generation and renewable energy are the only way out. China’s energy transformation must be completed in the next 20 to 30 years. China will advance from the current energy mix of conventional energy sources accounting for 80% of total energy, to one in which renewable energy becomes dominant.

China’s national policy encourages PV development, and there is a strong industrial base for domestic PV manufacturing. So it is not only necessary but also possible that the breakthrough in China’s PV application market is just around the corner. Now many countries are hesitating in their national PV policy, and the market is in decline. So it will be easy for China to dominate the market, and lead the global PV industry and even the new energy revolution.

The Engines of Technology and Manufacturing

The explosive growth of China’s PV market is not only a solar and energy revolution, but also a revolution in investment. China lists new energy as one of the seven new strategic emerging industries because of its enormous economic potential. Not just the new energy industry, but also associated emerging industries, including energy saving and environmental protection, high-end equipment, and new materials. They also have a bright future. According to current development prospects and estimates, investment in the PV industry will surpass that of any other industry. And if it can substitute for fossil fuel energy, its investment scale will outpace the total fixed assets of the existing industries by a large margin, and will promote sustained and rapid development in the next 30 to 50 years.

As a result, we will not miss this opportunity to take the lead in world PV development. We should improve our anticipation of the market, and continue to pay attention to upgrading the whole PV industrial chain. Technology and manufacturing is the foundation for China to becoming a PV major power. Different from oil, natural gas, coal and other fossil fuel energy, it is impossible for anyone to monopolize solar energy. The basis of competition lies in technology, and the one who has the core technology can dominant the market.

The past decade has witnessed an annual growth rate of 50% in global PV power generation, a development pace that no industry has achieved before. And China’s PV industry has made great contributions to it. Wolfgang Palz, president of the American Council on Renewable Energy, said that PV module manufacturers in China have made irreplaceable contributions to the world. Chinese enterprises have made great efforts to improve production efficiency and manage quality. This has helped to lower the cost and price of PV modules by a large margin within a limited amount of time, improve the competitive edge of PV power generation against conventional power, and add momentum and capacity for the rapid development of the market. Without Chinese enterprises, the world PV industry would not have achieved its current status, and the 800,000 jobs in the industry would not have been created.

At present, the manufacturing cost per watt for a PV module has fallen to 4.5 yuan, and the per-watt manufacturing cost of PV systems has also been lowered to between 8 and 9 yuan. This has enabled the cost of PV power generation to decrease by 80% within just a few short years. The PV-generated price of electricity was 4 yuan per kilowatt-hour in 2006, but now it is less than 1 yuan. These are all great achievements by Chinese PV enterprises.

These achievements could not have been made without relevant technological advances. PV development is based on the manufacturing industry and high technology is at its core, both of which are indispensable. At present, China has the advantage in both, especially in manufacturing. Although there is overcapacity in PV manufacturing, it is a temporary and purely structural problem. Recently, the government has listed many industries that have overcapacity, but the PV industry is not among them. This suggests that the overcapacity in the PV industry is not to be taken at face value. Overcapacity here is merely temporary. There appears to be overcapacity now, but that capacity may not be able to satisfy the domestic market in the future. According to the mid- to long-term plan, the average installed capacity between 2020 and 2050 will reach 30 GW. So if we include demand from the international market, PV production capacity may be far from enough.

There is another reason why PV overcapacity is structural. Due to the development of distributed PV power generation, domestic demand for thin-film batteries will increase substantially, which makes the thin-film battery actually in short supply, with only crystalline silicon cells in surplus.

By the end of 2012, Hanergy’s production capacity for thin-film solar had reached 3 million kilowatts, surpassing First Solar and becoming the global leader in the thin-film industry.

Hanergy’s surge out of the PV downturn will not only enable China to achieve leapfrog-style development in new energy technologies, but also to make strategic contributions to the global film industry, especially along two technical routes: silicon-based and copper indium gallium diselenide thin films. Without Hanergy, we might have lost the world’s most advanced CIGS technology and silicon-based thin-film technology. Through technology acquisition, Hanergy achieved both the large-scale production and upgrading of these two technologies in China.

Through the integration of global technology, Hanergy now possesses seven product technologies, including amorphous silicon–germanium, amorphous silicon–nanometer silicon, copper indium gallium diselenide, etc. The highest conversion rate of the small size champion module in CIGS technology has reached 18.7%, and thus is a global leader in thin-film solar industry. Hanergy continues to integrate global thin-film technology: it has again chosen five companies from many candidates as technical acquisitions. If it realizes all these acquisitions, Chinese companies will continue to lead the world in new energy technologies in the future.

Hanergy has the most advanced thin-film technology both in China and around the world, via independent intellectual property rights. Its leading position can be seen by considering the following factors: first, less consumption of raw material; second, short energy payback time; third, the small temperature coefficient of thin-film modules, and good low-light efficiency; fourth, it can be made into flexible film modules; and fifth, product diversification potential.

Hanergy’s leadership also means that China is taking the lead. Now Chinese film solar technology has overtaken traditional Western PV powers. If the government can clarify its position that thin-film technology—with a variety of advantages including environmental friendliness, flexibility, and a wide range of applications—is the right direction for solar industry development, and support the thin-film PV industry in terms of capital, technology, markets and other areas, China will have more of a competitive edge, and be better qualified to lead the development of the world PV revolution.

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* Editor’s Note: 1 pound is about 9.97 yuan (exchange rate in January 2014)