Turning the lights out at Wuxi SunTech

SunTech headquarters in Wuxi, Jiangsu Province
We noted last year how China was looking to provide a helping hand to its struggling solar panel industry by getting local governments to push projects using solar power. Beijing approved $1 billion in subsidies for 100 such projects last November. Now stick is following carrot. It is letting Wuxi Suntech, the main operating subsidiary of Wuxi-based Suntech Power Holdings, the country’s leading solar panel maker, slip into bankruptcy.

A group of eight Chinese banks, including some state heavyweights–Commercial Bank of China, Agricultural Bank of China and Bank of China–has initiated insolvency proceedings in a Wuxi court against the subsidiary (though not the NYSE-listed parent). This follows last week’s default by SunTech on $541 million of its bonds. If the bankruptcy petition goes  ahead as expected–Wuxi Suntech has told the court it will not file an objection to undergoing a court insolvency reorganization–it would represent the biggest corporate collapse in China in recent times, and provide a test of the country’s new bankruptcy law.

Yet more significant to this Bystander is the clear unwillingness of its lenders to keep propping up a loss-maker–SunTech owes the eight banks 7 billion yuan ($1 billion)–and particularly one as prominent as Suntech in an industry designated of national strategic importance. It also sends a signal to other Chinese solar panel makers to get their businesses in order as they struggle with global overcapacity, falling subsidies and international trade disputes–or they, too, will be allowed to go the same way as Suntech and many of its European competitors.

Then what is left of a culled industry will be consolidated into a few viable state champions.

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2 responses to “Turning the lights out at Wuxi SunTech

  1. Pingback: China Gives Another Boost To Its Solar Power Industry | China Bystander

  2. Pingback: China Lets Its First Corporate Bond Default | China Bystander

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