Yesterday I read a Raymond James analyst report (by Pavel Molchanov and Alex Morris) mentioning a Financial Times report that a senior Chinese government official said the country’s solar industry was like a “patient on life support,” that it would have to go through a painful series of cutbacks that would need to take place through “powerful market competition and cruel elimination,” and that support from the central government would not be forthcoming.

That’s tough love, especially considering many feel Chinese solar subsidies (through loose credit terms) are what drove the industry to its current 2X oversupply situation.  (To be fair, it didn’t help that many Western countries cut installation subsidies at the same time capacity was exploding.)

Unfortunately, as Raymond James and the FT also reported, it is local Chinese governments that have been giving manufacturers support lately.  The cities of Xinyu and Wuxi have given LDK and Suntech $80 million and $32 million, respectively.  This looks like a classic case of loss aversion, which as I explained in another post makes humans prone to make unfortunate gambles when facing difficult choices.

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