China industry profits sag as solar overcapacity strains manufacturers nationwide

• Reuters reports China’s industrial profits kept sliding in July, with solar makers among the hardest hit as deflation and overcapacity weigh on margins.

China’s profit slump is rippling through its solar sector. New data show industrial earnings fell again in July, and among the worst performers were solar manufacturers squeezed by a year-long price war and persistent overcapacity. Even efficient lines have struggled to break even as prices for polysilicon, wafers and finished modules sank below cash costs during parts of the first half.

The industry remains in flux. Analysts say restructuring and stricter standards could stabilize margins, but the timeline is uncertain. Several large producers posted widening losses in H1 2025, while a few reported modest improvement off deeply negative bases—suggesting that rationalization is uneven and dependent on provincial politics and financing. The stakes are global: Chinese firms dominate upstream supply, so their pricing and capacity decisions set the tone for module costs worldwide. 

Beijing has urged companies to end below-cost selling and align output with demand, while hinting at tougher actions if voluntary restraint fails. In practice, that could mean retiring older lines, tightening energy-intensity and quality rules, and enforcing discipline even if prices rebound. For developers and EPCs outside China, a credible reset would likely lift component prices from extreme lows but improve bankability—fewer supplier failures, steadier lead times, and stronger warranties.

For now, buyers should expect continued volatility into year-end: sporadic production cuts, opportunistic restocking, and localized shortages of specific formats. If consolidation gathers steam, 2026 could mark a new equilibrium—slower price declines, but a healthier base for long-term investment across the global solar chain.