There are many remarkable things about this New York Times story, on China's growing solar power industry:
Chinese companies have already played a leading role in pushing down the price of solar panels by almost half over the last year. Shi Zhengrong, the chief executive and founder of China’s biggest solar panel manufacturer, Suntech Power Holdings, said in an interview here that Suntech, to build market share, is selling solar panels on the American market for less than the cost of the materials, assembly and shipping.
Backed by lavish government support, the Chinese are preparing to build plants to assemble their products in the United States to bypass protectionist legislation. As Japanese automakers did decades ago, Chinese solar companies are encouraging their United States executives to join industry trade groups to tamp down anti-Chinese sentiment before it takes root...
[M]any worry that Western companies may have fragile prospects when competing with Chinese companies that have cheap loans, electricity and labor, paying recent college graduates in engineering $7,000 a year.
“I don’t see Europe or the United States becoming major producers of solar products — they’ll be consumers,” said Thomas M. Zarrella, the chief executive of GT Solar International, a company in Merrimack, N.H., that sells specialized factory equipment to solar panel makers around the world.
From a trade policy standpoint, this is a mess. Chinese firms appear to be dumping, and ordinarily, American consumers should just sit back and be thankful for the subsidized consumption. But years of Chinese subsidized consumption have created troubling conditions in American labor markets, and lingering macroeconomic imbalances that have produced unwelcome instability. How to respond is tricky, however. One doesn't want to start a trade war.
Of course, the threat of a protectionist response seems to have encouraged Chinese firms to preemptively plan to locate production facilities in America, which may or may not be a move in the direction of efficiency. At this point, it's just hard to tell.
If China does seriously begin targeting America as a source of consumption for green technologies, that could set up an intriguing dynamic, however. American demand for those technologies will depend on the extent to which the American government sets an appropriate price on carbon emissions. It would be ironic if Chinese industries recognized that American carbon rules are likely to increase in stringency with Chinese rules, and lobbied for better domestic carbon regulations. China may well end up pushing America to get its climate rules in shape, all out of economic self-interest.
This article originally appeared on The Economist.com