**One sentence that sparks interest in China’s photovoltaic stocks

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Regarding the forecast for China’s solar power installation capacity in 2020, the official stance at the highest levels is 50 gigawatts (1 gigawatt = 1000 megawatts, 1 megawatt = 1000 watts). On December 12, at the opening ceremony of the 2012 annual meeting of the China Council for International Cooperation on Environment and Development held in Beijing, the Premier of the State Council and head of the China Council for International Cooperation on Environment and Development cited the aforementioned figures. 　　Chinese photovoltaic stocks listed in the U.S. saw sharp rises in response. By the close on the 12th local time, JinkoSolar’s shares rose by 31.69%, JA Solar’s by 19.65%, Trina Solar’s by 19.47%, Yingli Green Energy’s by 18.23%, AES Solar’s by 11.06%, Suntech Power’s by 10.54%, and Trina Solar’s by 10.26%. 　　China’s photovoltaic industry, which accounts for 50% of global production capacity, exported 90% of its products to Europe before last year. After Europe and the United States imposed trade barriers on Chinese photovoltaic products, the development of the domestic photovoltaic market in China was seen as a key to saving Chinese photovoltaic enterprises, with particular hopes being placed on the installation and use of distributed photovoltaic systems. 　　On the 12th, at the \"3rd SOLARZOOM Members’ Conference and Innovosolar New Power Plant Models and Distributed Photovoltaic Power Generation Summit\" held in Shanghai, Wu Dacheng, secretary-general of the Photovoltaic Committee of the Chinese Society for Renewable Energy, said that **multiple projects are being used to promote the use of photovoltaic technology; by 2015, the capacity of distributed photovoltaic power generation alone is expected to exceed 20 gigawatts, while the total installed capacity by that year is likely to reach 40 gigawatts. 　　Wu Dacheng predicts that the installation volume of photovoltaic systems over the next five and ten years will **exceed the total targets set currently. 　　Frequent policy incentives **It was stated at the aforementioned annual meeting that \"simultaneously advancing industrialization, urbanization, informatization, and agricultural modernization holds tremendous potential for domestic demand.\" The new type of industrialization and urbanization that we aim to achieve must be industrialization and urbanization guided by ecological civilization. It harbors market opportunities with unlimited potential, giving rise to a vast ecosystem of industries. ” 　　Taking photovoltaic cells as an example, it is said that **\"currently, the total installation volume in China is less than 10% of the annual production capacity, so there is great potential for developing the domestic market.\" We will take advantage of urbanization efforts by implementing measures such as encouraging the use of solar power generation equipment and supporting the integration of distributed power generation into the grid, in order to expand our market domestically. ” 　　**It is estimated that by 2020, China’s solar power generation capacity will reach 50 million kilowatts (50 gigawatts). 　　Previously, China had adjusted the photovoltaic development targets for the 12th Five-Year Plan on three occasions. The figure was initially 5 gigawatts, later changed to 10 gigawatts, and then to 15 gigawatts. According to the **‘12th Five-Year Plan for the Development of Solar Power Generation’** published by the Energy Bureau in September this year, by the end of 2015, the installed capacity of solar power generation was to reach over 21 million kilowatts (that is, 21 gigawatts). ” 　　According to people familiar with the matter, the term “over 21 gigawatts” has little guiding significance. One is that every plan formulated is easily surpassed ； Furthermore, the **Energy Bureau finalized the Plan in July and issued it in August**. Following the sudden changes brought about by the EU’s \"anti-dumping\" actions at the beginning of September, the **Energy Bureau held an emergency meeting and decided to increase support for photovoltaic projects. The plan that had already been issued could no longer be altered; it specified 21 gigawatts, but implementation would take place at a level of 40 gigawatts. 　　Wu Dacheng said that current policies can, to a certain extent, address the issue of difficulties in connecting projects to the grid due to initial investment subsidies. “With the implementation of additional supporting policies, it is expected that by 2015, distributed photovoltaic power generation in China alone could exceed 20 gigawatts, which in turn will drive the development of a purely commercial market.” It is expected that the installation volume of photovoltaic systems in our country over the next five and ten years will **exceed the total targets set at present. ” 　　According to Wu Dacheng, the regulatory authorities are drafting three important regulations for the photovoltaic industry: the \"Regulations on the Management of Distributed Power Generation,\" the \"Guiding Principles for Promoting the Development of Photovoltaics,\" and the \"Implementation Measures for Distributed Power Generation Demonstration Zones and Standards for Electricity Price Subsidies.\" The exact timing of their introduction has not yet been determined, but it is only a matter of time before they are introduced. ” 　　Regarding subsidy funds, the central government has recently allocated 7 billion yuan to support the launch of photovoltaic power generation projects with a capacity of 3,157 megawatts. In 2012, the central government allocated a total of 13 billion yuan in funds to support the development of photovoltaic power generation, resulting in a total capacity of 5,200 megawatts for such applications in China. 　　Based on comprehensive factors such as investment costs, the subsidy rates have been set at 5.5 yuan per watt for photovoltaic power generation projects installed by users; the subsidy rates for standalone photovoltaic power stations and residential systems are 25 yuan per watt and 18 yuan per watt, respectively. There are 149 projects under the Golden Sun Demonstration Project that have a capacity of over 10,000 kilowatts, with a total installed capacity of 2.55 million kilowatts, accounting for 92% of the overall capacity. 　　Wang Haisheng, an analyst in the electrical equipment and new energy sector at Minsheng Securities, said that the first batch of projects approved under the Golden Sun program this year amounted to 1.7 gigawatts, while the second batch was 2.8 gigawatts. In total, the amount approved under this program this year will reach 4.5 gigawatts, far exceeding last year’s total of 689 megawatts. 　　Of these, the first batch of 500 megawatts will be connected to the grid by the end of this year, while the remaining 1.2 gigawatts will be connected by the middle of next year ； The second batch of 2.8 gigawatts will be connected to the grid by the end of next year, and the Golden Sun project will have 4 gigawatts connected by then. 　　The toughest period will be in the first quarter of next year. Although there are frequent policy incentives, it will likely take some time before these policies can help China’s photovoltaic industry truly emerge from its downturn. Some analysts say that the first half of 2013 was perhaps the most challenging period for Chinese photovoltaic companies. 　　Cai Duwei, a senior analyst at Solarzoom, said in Shanghai on December 12, “Due to inventory issues, Chinese photovoltaic companies will cut prices at any cost in the first half of next year.” ” 　　According to the inventory data provided by Cai Duwei, in October 2012 China’s photovoltaic inventory was as high as 7.47 gigawatts, and it was expected to remain at a high level by the end of 2012, reaching 6.56 gigawatts. 　　“After a year of losses and production halts, photovoltaic companies lacking cash flow will liquidate their production capacity and withdraw from the market as the year ends and banks start demanding repayment. ”Cai Duwei said, “This will lead to a capacity purge.” In 2011, photovoltaic manufacturers cut prices to reduce profits; in 2012, they reduced prices to cut gross margins. In 2013, price cuts could only rely on cost reductions brought about by technological advancements, and the pace of price cuts slowed down. However, it is expected that capacity reduction in the first quarter of next year will lead to sales at extremely low prices, after which market prices will return to a normal level. ” 　　“Some leading photovoltaic companies are now facing such tight cash flows that they can barely get by. ”An industry insider in the photovoltaic sector revealed. 　　Su Wangxing, an analyst at Anxin Securities, said, “It is expected that in the first quarter of 2013, a large number of small and medium-sized enterprises will withdraw from the market, while larger companies will survive, resulting in China’s photovoltaic production capacity dropping to 20-25 gigawatts.” ” 　　After that, the photovoltaic industry may see a turning point. “In the second half of next year, trade barriers will become clearer; the final decisions regarding the EU’s anti-dumping and countervailing measures, China’s initial decisions on anti-dumping and countervailing measures regarding polysilicon, and India’s initial decisions on such measures will all be announced, and all the negative factors will have been revealed. The rise of emerging markets, such as the decentralized development in China, the growing interest in markets in South America and Eastern Europe, the reduction in policy-related risks following the U.S. elections, and the large number of projects in India entering the installation phase, may all lead to a turning point for this industry. ”Su Wangxing said. 　　Regarding the Chinese market, Wang Haisheng expects that installations will reach at least 11 gigawatts next year, while this year they will be 5.5 gigawatts, representing a growth of over 100% on a year-on-year basis. It is estimated that next year, 4 gigawatts will be installed for solar power projects of this type, 5 gigawatts for large-scale power plants, and 2 gigawatts for distributed energy demonstration areas. Among them, the installed capacity of distributed power plants (Golden Sun and distributed energy demonstration zones) is set to reach 6 gigawatts next year, a 500% increase compared to this year, marking rapid expansion in the use of distributed photovoltaic systems.