China's solar industry has become a global powerhouse due to strong state support and significant private investment, but it is now facing new challenges, including punitive tariffs from other countries and a fierce price war domestically. Officials gathering in Baku for the COP29 summit next month are hopeful that they can agree on new financial targets aimed at assisting developing nations in addressing climate change, particularly by moving away from fossil fuels.

Last year, countries reached an agreement to triple the global installed renewable energy capacity by 2030. China is currently installing nearly twice the amount of solar and wind power as all other countries combined and holds a dominant position in the market. It manufactures eight out of every ten solar panels and controls 80 percent of each stage of the manufacturing process.

Furthermore, China is home to the world’s top ten suppliers of solar panel manufacturing equipment, with related exports reaching a record $49 billion last year, as reported by Wood Mackenzie. Analysts attribute this supremacy to significant state support. The International Energy Agency noted that Beijing invested over $50 billion in new solar supply capacity between 2011 and 2022.

The industry has also benefited from access to inexpensive raw materials, easily accessible capital from state-owned banks, and a large engineering workforce. Lauri Myllyvirta, co-founder of the Centre for Research on Energy and Clean Air, a climate think tank, mentioned that Chinese producers were ahead of others in terms of cost efficiency.