The Research Of The Over-investment Problem In Chinese Photovoltaic Industry

This thesis first introduces the related theory of free cash flow andover-investment by going through and review of the literature domestic and overseasand abroad, laying theoretical foundation for the full text; And then introduced theknowledge of photovoltaic (PV), the China PV industry characteristics anddevelopment, analyzed China PV industry overcapacity problem from the aspects ofmarket supply and demand, and pointed out that the oversupply situation willcontinue to exist in recent years due to the lower speed of market expansion andinefficient of the de-capacity process. Then on the basis of theories about excessiveinvestment by Scotte Richardson, the article chose the30listed on China solarenterprises from China SSEs, NASDAQ,NYSE,HKSE with the their financial datafrom year2003to2012according the China PV industry characteristics, made theempirical analysis, built the investment forecast model and estimated the moderateinvestment level and excessive investment level, to verify that there exists thephenomenon of excessive investment among the PV enterprises in Chinese. At last,,itpoints out the reasons behind the phenomenon of excessive investment in photovoltaic industry that first is the irrational market economy and business investment blindness,second is the bias from financial institutions and all levels of governments, who isdrove by the unreasonable performance appraisal, all these played important role inpushing the industry into over investment and over capacity.It is a big problem that the Overcapacity has plagued the healthy development ofChina’s economy for a long time, and it is also the current prominent problems to besolved in the adjustment of industrial structure. Excess capacity is very common in thetraditional industries such as steel, cement, but in recent years has also appeared insome new industries, photovoltaic industry is one of the industries facing overcapacityproblem. Under the background of global actively promote low-carbon economy,photovoltaic industry as part of the new energy industry, has been included in China’sseven major strategic emerging industries. It is very important and meaningful to studythe problem of excess production capacity in the solar industry.As an emerging industry, photovoltaic is at the initial stage of industry life cycle. Fromthe supply side, due to the national supporting policy and the downstream low barriersto entry, numerous companies enter into the photovoltaic industry, PV industrial parkhave been built up everywhere, the production capacity expanded much higher; butfrom the demand side, due to the infrastructure and supporting facilities is not perfect,photovoltaic power generation cost is higher than other power generation methods at present, such as thermal power, hydropower, which limits the growth of photovoltaicproducts in the market.Due to limitations in the domestic market, the PV industry depends heavily onforeign market, especially for the strong dependence on European market. However, inrecent years, due to the financial crisis, economic recession, many European andAmerican photovoltaic applications markets have cut back on photovoltaic power ofthe subsidies, makes the European PV market demand drop much, and the global solarpower capacity growth increased at lower speed, while the china production capacityof the photovoltaic companies, has accounted for more than70%of the globalcapacity, even more than the world’s new installed capacity in2013whole year, whichshowed us the serious overcapacity problem.At the same time, due to china is in transition period, the imperfect market, theelements of the fiscal and taxation systems, the examinational physique and improperintervention of local government behavior, lead to the "market" is not fully play a role,excess capacity could not reduce to a reasonable level by a "market" way, these alsoplay part role in resulting in the photovoltaic industry overcapacity, and will causesituation that the greater supply than demand exist for a long time in the future.By selecting and analyzing the financial data of China’s leading photovoltaicenterprise’s, which at present are listed in China, United States and Hong Kongsecurities exchange, we can find that, on the basis of accounting information, photovoltaic industry in china would still exist the phenomenon of excessiveinvestment for a certain period of time.Regarding to the problem of over capacity, this article argues the methods tomitigate the phenomenon of excessive investment, we could not make the emergencybrake imprudently, and instead, we should be actively planning for the long-termdevelopment of photovoltaic industry. On the one hand, we should accelerateinfrastructure building, standardize the market access conditions, improve the controlsystem, to build a good environment for the photovoltaic industry development; Onthe other hand, to avoid local government the improper intervention to thephotovoltaic enterprise investment decisions, and instead, let the market economyactive play its role, make the outdate production capacity demising by the power ofmarket itself, to encourages the acquisition and merger between enterprises, enhancethe competitiveness of the whole industry; Secondly, to actively explore the domesticPV market, improve the subsidy policy, actively explore the domestic photovoltaicapplication market, encourage photovoltaic industry technology innovation, continueto reduce the product cost under the premise that conforms to the national strategy oflong-term development, thus promote the healthy and rapid development ofphotovoltaic industry in China.