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China's solar soars while wind suffers turbulence, says Brandt and Wang

August 27, 2019

Chapter 9:  China’s Development of Wind and Solar Power

By Loren Brandt and Luhang Wang

 

Above all, sectors in which firms are most open to competition and foreign participation and enjoy freedom over sourcing decisions and technology, and customers have choices in the market, have been the most successful in developing and upgrading their capabilities in line with China’s evolving comparative advantage.

 

China’s solar sector was extremely successful under these terms over a significant portion of the period we examine- expanding market penetration in advanced countries, increasing the role of local sourcing, and narrowing the gap with firms from advanced countries in the use of more mature technologies.

 

In sharp contrast, policy choices have made China’s wind turbine sector much less open over time to foreign involvement, all but eliminating these pro-competitive pressures on local firms. In nearly all advanced manufacturing sectors, the world’s leading firms keep their innovative edge by working collaboratively with top-tier suppliers. Chinese mercantilist industrial policy discourages this sort of cooperation, thereby limiting the flows of knowledge and skilled personnel between these firms. These problems have been compounded by government priorities favoring bigger turbines (and those used offshore), which have misdirected R&D efforts and raised costs; by incentives for firms to vertically integrate; a near monopoly of downstream activity by state and state-connected firms; and a regulatory environment that has muted the role of the market at every level. (p. 373)

 

In Policy, Regulation and Innovation in China’s Electricity and Telecom Industries. Loren Brandt and Thomas G. Rawski, eds.  Cambridge University Press, 2019.

 

https://www.cambridge.org/us/academic/subjects/economics/economic-development-and-growth/policy-regulation-and-innovation-chinas-electricity-and-telecom-industries?format=PB

 

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