The mainland's solar panel industry is showing signs of booming again after a prolonged downturn - raising fears of another bust when the splurge of public money that is driving a spike in demand dries up. Lured by generous power tariffs and financing support to promote renewable energy, mainland firms are racing to develop multibillion-dollar solar generating projects in the Gobi desert and barren hills of China's vast north and northwest. The sweeteners have not only lured traditional energy investors like China Power Investment Corp, but also a host of solar panel makers and even companies such as toll road operator Huabei Express and Jiangsu Kuangda Auto Textile Group. Some solar panel manufacturers, encouraged by a recovery in sales in the last two quarters - largely on surging demand from China and Japan - are expanding production capacity, even though the overall sector remains mired in a severe glut. But industry officials worry fast-growing generation capacity will increase fiscal pressures on China and Japan and force them to cut subsidies, which will then hit demand, just as happened with previous big solar users Germany, Spain and Italy. "The key is whether the Chinese government is determined enough to boost solar generation," Sun Haiyan, senior executive at Trina Solar, said when asked if the current solar expansion in China was sustainable. China already boasts solar manufacturing capacity of about 45 gigawatts, enough to meet global demand this year. Trina Solar, JinkoSolar, Yingli Green Energy and Canadian Solar - among the world's largest solar manufacturers - are adding 3GW of capacity, according to industry specialists and Chinese media. Beijing is trying to consolidate the sector and force out the legion of small "zombie plants" currently sitting idle, but analysts say it faces stiff resistance from indebted regional and city governments that have backed local solar champions. Michael Barker, analyst at global solar research firm Solarbuzz, said a risk now faced by the solar panel industry was that manufacturers may react to improved demand "with somewhat irrational exuberance". "This could upset the stabilisation process that has occurred during the past year, once again creating an overcapacity situation," he wrote in a note this week. Beijing's decision in July to more than quadruple solar generating capacity to 35GW by 2015, and Japan's push to find alternatives to lost nuclear power following the 2011 Fukushima disaster, have revitalised the moribund Chinese panel industry. China installed 8GW last year, turning it into the world's largest solar market. That included 6GW of solar farms - utility-scale, ground-mounted facilities - and 2GW of distributed solar energy such as rooftop installations. This year, it is talking about adding 14GW. Installing 35GW of solar capacity would cost around US$50 billion, plus subsidies granted to solar power producers under long-term purchase agreements. But it is uncertain how long the current strong Chinese and Japanese demand, expected to account for 40-45 per cent of global installations forecast for this year, will last. While the potential would seem to be large, the rapid build-up of solar and wind farms in western China has already created a problem. State Grid Corp of China has been struggling to transmit power from there to population hubs in the south and east owing to a lack of a comprehensive high-voltage and smart grid to harness the intermittent renewable power.