EU Probes Hit China Clean Energy; Ming Yang, Longi Stocks Fall

Key Takeaway

• EU's probes into Chinese wind and solar manufacturers, including Ming Yang (-4.2%), Longi Green Energy (-3%), and Goldwind (-2%), signal regulatory challenges for China's clean energy sector.
• Investigations focus on preventing state-funded foreign competition from disadvantaging EU companies, affecting bids in Romania, Spain, Greece, and France.
• Despite industry concerns over potential discrimination by the EU regulation, Longi asserts its European operations remain unaffected.

EU Probes Impact Chinese Manufacturers

Shares of China's leading wind and solar manufacturers experienced a downturn following the announcement of two separate investigations by the European Union. These probes are aimed at protecting the bloc's producers from competition by state-funded foreign rivals. Notably, Ming Yang Smart Energy Group's shares dropped by up to 4.2%, Longi Green Energy Technology Co. saw a decrease of up to 3%, and Goldwind Science & Technology Co.'s shares fell by as much as 2%. This development comes as a significant challenge for China's wind and solar industries, which are already grappling with issues of excess capacity and price wars that undermine profitability. The European Union's actions represent a considerable obstacle for Chinese companies aiming to expand their presence in lucrative overseas markets, including Europe. Dennis Ip, an analyst at Daiwa Capital Markets, highlighted the EU investigations as a major factor negatively affecting the share prices of export-oriented and utility-focused companies in both sectors.

Regulatory Scrutiny Intensifies

The European Commission's decision to launch investigations into Chinese companies' involvement in wind parks and solar projects across various EU countries marks a significant step in the bloc's efforts to safeguard its economic interests. The probes, which are among the first under the EU's new Foreign Subsidy Regulation, aim to prevent state-funded companies from leveraging their financial power to disadvantage EU competitors. This regulatory action follows concerns over the impact of cheap Chinese imports on the EU's clean tech industries and the potential for these imports to undercut local production. The investigations focus on bids by Chinese firms, including Longi and state-owned Shanghai Electric Group Co., for a solar park in Romania and involvement in wind parks in Spain, Greece, and France. The EU's internal market commissioner, Thierry Breton, emphasized the strategic importance of solar panels for Europe's clean energy production, job market, and supply security.

Industry Response and Global Implications

In response to the EU's investigations, Longi stated that the probe would not affect its operations and delivery capacity in Europe, while Mingyang acknowledged the EU's announcement without further comment. Goldwind and Shanghai Electric did not respond to requests for comment. The China Chamber of Commerce to the EU expressed grave concerns about the investigations, arguing that the regulation could unduly burden and potentially discriminate against Chinese enterprises operating within the EU. This situation underscores the growing tension between the EU's ambition to protect its clean tech industries and the global dynamics of the clean energy market, where Chinese companies play a significant role.

Street Views

• Dennis Ip, Daiwa Capital Markets (Neutral on China's wind and solar sectors):

  "The investigations underpin increasing difficulty for China solar module makers and wind turbine generator makers to export to the EU."

Management Quotes

• Longi Green Energy Technology Co.:

  "The EU investigation will not impact its operations and delivery capacity in Europe."

• Ming Yang Smart Energy Group:

  "It has taken note of the EU’s announcement, but declined to comment further."