The European Union has launched a probe into alleged dumping of solar panels and parts by mainland producers at below-market prices and in quantities that have purportedly hurt the European industry.
Analysts said this would likely prompt a "tit-for-tat" retaliatory investigation by the Ministry of Commerce of alleged dumping on China of polysilicon, the primary raw material for making solar panels and parts, by EU manufacturers.
A group of mainland polysilicon makers urged the ministry last month to take action.
After an anti-dumping complaint was lodged in late July by a group of European makers of solar panels and parts representing over a quarter of the EU's output, the European Commission decided to launch an official probe.
"In terms of import value affected, this is the most significant anti-dumping complaint the European Commission has received so far," it said in a statement yesterday.
Shen Danyang, a spokesman at the ministry, said in a statement that Beijing "deeply regrets" the EU's decision.
"Limiting [the export of] Chinese solar power products not only hurts the interest of both Chinese and European industries, it also hurts the healthy development of the global solar and clean energy industry," he said.
The commission said it would collect information from questionnaires sent to EU producers and importers as well as mainland exporters. It will decide within nine months whether to impose provisional anti-dumping duties, which normally will last six months. It may also decide to continue the investigation or terminate it.
It is legally obliged to decide on any definitive measures within 15 months of the investigation's commencement, that is, before December 5 next year.
To impose measures, it must conclusively show there was dumping - the sale of products overseas at prices below home market prices. It must also demonstrate that material injury was suffered by EU makers and that imposition of the measures is not against the EU's interest.
The official China Daily quoted an unnamed ministry official on Wednesday as saying that Beijing was studying "how to fight back appropriately". Calls to the ministry's press office yesterday went unanswered.
The United States imposed provisional anti-dumping tariffs in May of 31 per cent to 250 per cent on mainland exports of solar cells. Some mainland cell makers are getting around this by outsourcing wafer-to-cell processing to Taiwan.
Ray Lian Rui, a Shanghai-based analyst at consultancy Solarbuzz, said the fact that the EU probe included panels and parts - wafers and cells - made it difficult for mainland makers to avoid the tariffs if the EU imposed them.
"A way out is to relocate the entire supply chain out of the mainland. But given the major global production capacity glut, it will be hard to do," he said. "The other thing mainland firms could do is develop new markets, which will take time."
After a plant building binge in the past few years, more than 70 per cent of the world's wafer production capacity was located on the mainland, Lian said.
Most panel and parts makers the world over are making losses due to oversupply and weak demand. Some have sought bankruptcy protection or shut down.