Frictions over Renewable Energy

Mounting tensions

Li Chunding, research assistant at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, attributed frequent and intensifying trade frictions between China and the United States to the following reasons:

On the one hand, Chinese investment in the renewable energy sector and the production capacity of the industry are both increasing rapidly. The sector has upgraded its technology, which helps increase both its competitiveness in the international market and its exports significantly. The United States is an important market of Chinese renewable energy products, and it is natural that it takes trade protectionist measures in response to the expansion of Chinese exports.

On the other hand, the burst of financial bubbles during the economic crisis has prompted the US Government to attach greater importance to the real economy and lead the economy back to the track of the real economy. Against such a background, any threat posed by other countries will elicit backlash from the US Government and relevant companies.

More importantly, the renewable energy industry is a very important strategic sector for every country and is recognized as one with huge potential, so it is natural that the United States wants to lead the industry and even have a monopoly over it. For such a strategic industry, Chinese exports are very likely to face trade barriers erected by the United States.

"The renewable energy industry is also the driving engine and the key for China's economic restructuring and industrial upgrading. Therefore, in response to trade frictions started by the United States, we should take all kinds of measures to ease and settle disputes and reduce our losses."

China-US trade frictions previously occurred in middle- and low-end products of manufacturing industries, a direct cause of China's trade surplus. However, China reaps few benefits from such trade surplus, and this kind of products may gradually disappear as a result of upgraded industries. Li said that trade frictions in the new energy industry carry more strategic value than that arising from those in middle- and low-end products.

Because the new energy sector is of strategic importance to its development, the United States is not likely to make a compromise on trade frictions in this sector.

Market anxieties

Trade frictions between China and the United States in the renewable energy industry have expanded from the solar energy industry to the wind power industry and may extend to other renewable energy industries in the future, which has caused anxieties in the markets on both sides of the Pacific.

Anti-dumping and countervailing investigations launched by the United States will harm the development of the Chinese new energy industry. Insiders say that although China exports a small number of wind towers to the United States, and anti-dumping and countervailing investigations have limited effects on the development of the Chinese wind tower industry, the United States may expand the anti-dumping and countervailing investigations to other products.

In the investigations, the United States does not recognize China's market economy status, but compares the price of Chinese exports with that of a surrogate country, which is a market economy country. In most cases, the price of China's exports is lower than that of a surrogate country because China has lower production costs because of its cheap labor and low-priced raw materials. As a consequence, China will be ruled as dumping and the United States imposed high anti-dumping duties. If China imposes high anti-dumping duties using the US calculating method, the trade war in the new energy industry between the two countries will be unavoidable.

China has launched anti-dumping and countervailing investigations on solar-grade polysilicon products against the United States. If China takes punitive measures on US polysilicon products, Hemlock and MEMC, the world's largest polysilicon producers, will both be affected.

In response to the anti-dumping and countervailing measures taken by the United States, MOFCOM spokesman Shen Danyang said that the US restrictions not only harm China-US cooperation in the renewable energy industry, but also harm the interests of the US energy industry. The two countries should make joint efforts to combat global climate change and energy challenges.

The United States attributed the slow development of its new energy industry resulting from its own weak competitiveness to the so-called threat posed by Chinese new energy products and intended to take restrictive measures against China. Chinese companies and the Chinese people express strong dissatisfaction with this, said Shen.