China’s $7bn polysilicon plan tests Beijing’s solar overcapacity ambitions

• China’s top polysilicon makers are weighing a ¥50bn fund to buy and shutter inefficient capacity—an “OPEC-for-solar” gambit that could reshape module prices and the global supply chain.

China’s push to tame industrial overcapacity has zeroed in on the solar sector’s upstream chokepoint: polysilicon. Leading producers are discussing a 50 billion yuan (about USD 7 billion) restructuring vehicle to purchase and permanently close older, loss-making plants—paired with coordinated output limits meant to stop a ruinous price war. If implemented, the plan could sideline roughly a third of national capacity and stabilize a market where supply has been running at roughly double global demand.

Backers frame the idea as a necessary reset after a breakneck buildout left factories competing on volume at wafer-thin margins. But it faces thorny politics and execution risk: deciding who gets included, convincing local governments to accept closures that hit tax bases and jobs, and maintaining discipline if prices rebound and members are tempted to ramp. Analysts warn that even with cuts, 2025 utilization might hover near 35–40%, leaving the system saturated unless downstream demand meaningfully accelerates. 

For buyers outside China, the implications are mixed. A credible curtailment could lift polysilicon—and eventually module—prices from today’s depressed levels, complicating budgets for projects counting on continued cost declines. Conversely, a more orderly supply side may reduce the whiplash of boom-bust cycles, improve quality consistency, and create room for non-Chinese investments in wafers and cells to gain a foothold. How the mechanism is governed—who funds it, how quotas are set, and what enforcement looks like—will determine whether it’s true reform or a brief ceasefire.

What to watch next: formal announcements on fund capitalization and governance; any ministry guidance that blesses (or conditions) coordinated output limits; signals from provincial authorities on plant retirements; and early price movements in polysilicon spot markets. A durable framework in solar could offer a template for Beijing’s broader overcapacity clean-up—while failure here would hint at harder fights ahead in sectors like EVs and shipbuilding.