[Energy Analysis] China’s Solar Power Dominates the World Yet Faces Deficits... The 'Paradox of Overproduction' Emerges

Chinese manufacturers, who dominate the global solar market, find themselves paradoxically unable to make profits.

Leading Chinese solar companies JinkoSolar, JA Solar, and Tongwei all recorded significant losses in the first half of this year. Despite expanding production capacity to overwhelm the global market, supply has far outstripped demand, leading to a collapse in panel and material prices. This has been compounded by a slowdown in installations within China, reduced export incentives, and trade barriers in major markets including the United States.

JinkoSolar reported revenues of 24.73 billion yuan in the first half of the year, a 22.3% decrease compared to the same period last year, with a net loss expanding to 3.08 billion yuan. JA Solar also saw revenues drop to 17.498 billion yuan, down 26.8%, resulting in a net loss of 2.663 billion yuan. Tongwei recorded revenues of 34.357 billion yuan and a net loss of 5.119 billion yuan.

The world's largest solar market is witnessing simultaneous losses from its largest manufacturers.

The issue is not a lack of demand.

It lies in the fact that too much has been produced.

The problem with China's solar industry can be summed up as a 'paradox of success.'

Over the past few years, Chinese companies have built overwhelming production capacity across the solar industry, from polysilicon to wafers, cells, and modules, through massive investments and government support, as well as vertical integration of the supply chain.

However, while production facilities have rapidly increased, global demand has not kept pace.

Suppliers have lowered prices to maintain operating rates and defend market share, leading to a vicious cycle where competitors follow suit, further driving down prices.

JA Solar stated in its first-half performance report that the industry remains in a structurally oversupplied state, and that short-term capacity reductions or restructuring alone will not resolve the issue. In fact, JA Solar's solar module business recorded a negative gross profit margin in the first half of the year.

The so-called 'involution' competition, which the Chinese government has recently begun to address, has manifested in the most extreme form within the solar industry.

While companies have increased production and lowered prices, the overall profit of the industry has vanished.

From 212GW last year to 72GW this year... a 66% drop in installations

Additionally, the solar installation market in China has faced a sharp adjustment.

According to the National Energy Administration (NEA) of China, new solar installations in the first half of this year totaled approximately 72.07GW, a decrease of about 66% compared to 212.21GW during the same period last year.

However, this figure should not be interpreted as a sudden collapse in China's solar demand.

Last year's numbers were abnormally high.

The Chinese government plans to transition the pricing of electricity sales from new solar and wind power plants from a virtually fixed price system to a market price-centered system starting June 1, 2025.

Concerns have grown that the new system could create uncertainty regarding the future profitability of power producers, prompting them to expedite project completions before the implementation date.

As a result, approximately 93GW of solar installations were completed in May 2025 alone, equivalent to several years' worth of installations for many countries.

Since last year's first-half demand pulled forward future demand, this year is experiencing the backlash.

What is happening in the Chinese solar market is more akin to the hangover after rapid growth rather than the 'end of growth.'

Exports are also blocked... a 21.4% decrease in July shipments

The situation in overseas markets is also challenging.

According to a Reuters report citing Chinese customs statistics, exports of solar cells and panels from China fell to 830,000 tons in July, a 21.4% decrease compared to the same month last year.

This is down from 980,000 tons in June, marking a decline for three consecutive months. In March of this year, exports had soared to 1.75 million tons.

There is a reason for the surge in exports in March.

The Chinese government abolished the value-added tax export rebate for solar products starting April 1.

In January, the Ministry of Finance and the State Taxation Administration announced that the export tax rebate for solar products would be eliminated from April, and the rebate rate for battery products would also be gradually reduced.

Previously, Chinese companies could receive a portion of their taxes refunded when exporting, but this benefit has disappeared, reducing the profitability of overseas sales.

Chinese companies rushed to ship products overseas before the new regulations took effect in the first quarter, leading to a sharp decline in exports afterward.

Moreover, major markets, including the United States and Europe, have intensified tariffs and supply chain regulations on Chinese solar products, complicating traditional export strategies.

Thus, viewing the recent export decline as simply due to 'U.S. tariffs' is not entirely accurate.

Oversupply, the abolition of export tax rebates, trade regulations from major countries, and changes in overseas demand are all acting simultaneously.

Yet solar installations have caught up with coal

The irony emerges here.

Despite the massive losses incurred by solar manufacturers, the products they have produced over the past few years are fundamentally changing China's power industry structure.

As of the end of June, China's solar power generation capacity reached approximately 1.272TW, just a few gigawatts shy of the 1.275TW of coal-fired power generation capacity. The National Energy Administration of China also assessed that the scale of solar and coal facilities had effectively reached a similar level at that time.

By the end of July, solar capacity had increased again to 1.29TW.

This is a change that would have been unimaginable just over a decade ago.

From a corporate profit and loss perspective, the Chinese solar industry is in crisis.

However, looking at the number of power plants, China's energy transition is progressing on a historic scale.

Companies are in the red, but the industry is changing the world.

This is the greatest paradox presented by Chinese solar power.

Is cheap solar a 'victory' or 'failure' of China's industrial policy?

From here, the analysis from TokenPost begins.

It is difficult to simply evaluate the Chinese solar industry as a success or failure.

From the perspective of corporate profitability, there are clear issues.

As production capacity has excessively outpaced demand, price competition has intensified, forcing even global companies to endure losses of billions of yuan.

However, the perspective of national strategy is somewhat different.

China's massive production capacity has driven down global solar panel prices, significantly improving the economics of solar power generation.

In the process, China has secured a central position in the global solar supply chain.

The cost of solar power generation has decreased, installation volumes have surged, and even China's generation capacity structure has changed.

In other words, China has secured industrial dominance and energy infrastructure at the expense of corporate profit margins.

The question is how long this model can be sustained.

While it may be a strong strategy to lower prices and push competitors out of the market, if domestic companies continue to lower prices after competitors have disappeared, the ultimate outcome could be the world's largest production capacity with the lowest profitability.

This is why the Chinese government has recently begun to officially address the issue of 'involution competition.'

Where solar power and AI intersect... ultimately, it's about 'electricity.'

It may be easy to think that this change is unrelated to the digital asset or AI industry.

However, if we look at both industries from a lower level, they converge on the same raw material.

Electricity.

AI data centers consume electricity.

Bitcoin mining consumes electricity.

Cloud computing and semiconductor factories do the same.

And one of the fastest-growing costs in the global tech industry today is electricity and power networks.

According to the National Energy Administration of China, electricity consumption in the internet data service sector increased by 44% year-on-year in the first half of this year. Electricity consumption for electric vehicle charging and swapping services also surged by 56.9%.

As AI expands, data centers become necessary, and as data centers increase, power plants and transmission networks are required.

Therefore, the oversupply of Chinese solar power is not merely a performance issue for solar companies.

Cheap panels and large-scale renewable energy facilities have the potential to change the cost structure of computing in the long term.

Over the past decade, computational infrastructure has moved in line with semiconductor prices.

In the next decade, it is likely to move in line with electricity prices.

Who will consume the excess electricity?

As renewable energy rapidly increases, another issue arises.

The sun does not only shine when electricity is needed.

When the power grid cannot accept it or there is insufficient demand, the power that can be generated must be wasted. This is known as curtailment.

As China's solar and wind installations rapidly increase, the importance of transmission networks, storage devices, and power market reforms has become more critical than the installation of power plants.

Conversely, AI data centers and other large-scale computing facilities can consume massive amounts of electricity 24/7.

Thus, the question changes from "How do we supply electricity to computation centers?" to "Can we move computation to where there is excess electricity?"

The Bitcoin mining industry has already been operating under this economic logic for several years.

As power constraints become more severe, AI infrastructure may also move in a similar direction.

The oversupply of solar power and the boom in AI data centers may seem like two entirely different phenomena, but they ultimately converge on one issue: Where can we secure cheap electricity?

Energy is also becoming a digital asset.

There is another change happening here.

Not only electricity itself but also the 'attributes' of electricity are becoming tradable.

In China, the trading of Green Electricity Certificates (GEC) is rapidly expanding. According to the National Energy Administration of China, approximately 82.73 million GECs were traded in June alone, with wind and solar being the core trading targets.

Certificates that prove a company has used renewable energy electricity, along with generation data and carbon reduction achievements, are increasingly becoming a financial and data asset.

The issuance, tracking, and trading of these assets may also expand the use of blockchain or attempts to tokenize some of them in the future.

However, it is premature to directly link this to an 'energy RWA market' at this stage.

What is important is the fact that the connection from physical electricity → generation data → environmental value → financial assets is being established.

A question for Korea... The issue is not the panels but the power grid.

Contrasting impacts are expected in Korea as well.

Domestic companies like Hanwha Solutions Q CELLS, which have local production bases in the U.S., may gain relative opportunities as U.S. regulations on Chinese solar products tighten.

Conversely, if the oversupply of Chinese products continues in the global market, pressure on solar product prices and margins will not easily dissipate.

From the perspective of energy consumers, the situation is different.

As solar panel prices decrease, the cost of building power plants also lowers. This can be a positive factor for AI data centers, semiconductor factories, and large industrial facilities in securing renewable energy in the long term.

However, Korea faces a more challenging issue than panel prices.

It is the power grid and location.

If it is difficult to connect power plants to the grid or if there are issues with power supply in the metropolitan area when trying to build data centers, then no matter how much panel prices drop, the significance will be limited.

The current state of the Chinese solar industry offers a lesson for Korea as well.

In energy transition, what is important is not simply producing a lot of generation facilities.

It is essential to design a unified infrastructure that includes generation, storage, transmission networks, data centers, and power markets.

Chinese solar companies are currently paying that cost.

They have produced the most solar panels in the world and built the most power plants.

As a result, solar power is on the brink of surpassing coal as China's largest energy source.

However, the books of the companies that created this are piling up with losses.

Thus, the crisis of Chinese solar power is not merely a recession.

After expanding production capacity to the point of dominating the global market, that overwhelming scale has begun to destroy their own profitability.

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