Illegal Factories Undermine China's Solar Overcapacity Crackdown¶
Source: South China Morning Post
Date: May 22, 2026
TL;DR¶
China's two-year campaign to eliminate severe solar overcapacity is being undermined by illegal factories that flout the Ministry of Industry and Information Technology's strict "capacity quotas." Industry insiders estimate that China's actual solar glass production is 5-10% higher than permitted capacity, as some factories break ground without quotas or secretly expand production lines — often with local government complicity.
The Overcapacity Problem¶
China's solar industry has been plagued by severe overcapacity that sparked vicious price wars, undermined domestic manufacturers' bottom lines, and fueled protectionist policies overseas. In response, Beijing introduced tough policies with the Ministry of Industry and Information Technology enforcing strict capacity quotas.
The Underground Response¶
Permitted capacity for solar glass has dropped from ~130,000 tonnes/day (2024 peak) to just over 80,000 tonnes/day. However:
- Some factories ignore the rules entirely — breaking ground without obtaining quotas
- Others build production lines exceeding their approved capacity
- Estimated 5-10% excess production beyond official figures
Local Government Complicity¶
The key enabler: local governments often give tacit consent to these violations because they want to "attract hi-tech companies to boost the local economy and tax revenues." This creates a classic central-local tension in Chinese industrial policy.
Historical Context¶
During 2020-2021, China's solar glass industry experienced a "gold rush" with prices soaring to ~40 yuan/m² (against ~13 yuan/m² costs). This led a wave of firms to enter the market — including companies with no background in glass manufacturing — setting up the capacity that now needs to be unwound.