Chinese solar companies are reducing production and laying off workers to cut costs, in a bid to cope with the crisis triggered by the European Union anti-dumping investigation and anti-dumping duties imposed by the United States.
The European Commission launched a formal investigation in early September, which activated the largest trade dispute involving China in terms of trade volume.
China's solar product exports were worth $35.8 billion in 2011. The EU receives a share of more than 60 percent of those exports, or $20.4 billion.
In May, the US decided to impose tariffs on more than 31 percent of solar panels made in China, in addition to the fees ranging from 2.9 percent to 4.73 percent imposed in March, after it claimed that China was "improperly subsidizing its solar manufacturers".
Suntech Power Holdings, one of the world's largest producers of solar panels, said on Monday that in order to cut production costs and operating expenses, it has temporarily shut down a portion of its solar cell production capacity at its Wuxi, Jiangsu province, headquarters.
The company said the move will affect about 1,500 employees, but declined to say whether they will be fired or relocated to other sections.
"In light of the preliminary US anti-dumping tariffs, the European anti-dumping investigation, and oversupply of solar modules, we have decided to right-size our production capacity and continue to optimize our organization," said David King, Suntech's CEO.
Trina Solar, another giant Chinese solar company, said it will cut about 200 employees at the management level.
New York-listed LDK Solar, which has seen losses recently, said it is going to cut 5,554 employees, accounting for 22 percent of its staff.
Zhang Hanbin, senior market director of Canadian Solar — a Nasdaq-listed solar panel producer — said that they have seen changes recently in the European market.
"Some clients stopped picking up the goods," Zhang said.
She added that the company may have to "make adjustments" in the fourth quarter, but noted that if domestic sales turn out to be good, they may be able to make up for the losses in the European market.
Chinese solar companies control about 70 percent of the global output of photovoltaic modules, with 90 percent of their products sold overseas, mainly to Europe and the US.
But the companies are facing their biggest challenge ever after the moves by the EU and the US, on top of sluggish demand and falling prices.
German Chancellor Angela Merkel reiterated on Monday her position that the solar dispute between China and the EU should be settled through political dialogue.
Vice-Foreign Minister Song Tao on Monday also reaffirmed the country's opposition to protectionist moves following the European Commission's decision to launch the anti-dumping probe.
It's "unreasonable" for some German solar manufacturers, which have received millions of euros in government support, to accuse their Chinese counterparts of unfair competition, said Wolfgang Hummel, director of the German Center for Solar Research, in an interview with Xinhua News Agency.
SolarWorld, the company which proposed the EU anti-dumping investigation, has received about 137 million euros ($179 million) of financial support from the German government, including investment allowances, from 2003 to 2011.
"Without government support, SolarWorld could never be as successful as it is today," Hummel said.
"The industry giant, however, has underestimated the growth pace of its Chinese competitors," Hummel said, adding that the high production costs in Germany are making the country's solar manufacturers lose their competitiveness.
Chinese manufacturers have been increasing their investments in innovation, and the quality of Chinese products has also improved, he said.
Zhang, from Canadian Solar, which is based in Suzhou, Jiangsu province, echoed that view.
Zhang said that the biggest financial support for her company, 10 million yuan ($1.5 million), came from the provincial government and was far less than the amount received by German companies.
"We didn't get free land or interest-free loans as the German companies claimed. But one thing is for sure, Chinese people know how to do big things with small money," she said.
"I have lived and worked overseas for more than 20 years, and I know the differences between how Chinese companies spend money and how overseas companies spend it."
