China solar installations plunge 66% as overcapacity reshapes industry

China added 66% less solar capacity in the first half, the steepest drop on record, as a policy-driven rush unwound and overcapacity forced consolidation.

China's new solar installations fell 66% in the first half from a year earlier, the China Photovoltaic Industry Association said, as a pricing reform deadline that spurred a record 2025 buildout triggered a sharp reversal.

"The industry is moving onto a more sustainable trajectory," the CPIA said at its annual conference in Ningbo on Thursday, calling the plunge a "return to rationalization" after two years of immense losses across the sector.

The association broke with tradition by declining to update its 2026 installation forecast, having projected 180 to 240 GW in February. That range already marked a sharp reduction from last year's record 315 GW. The 66% first-half decline reflects the unwinding of a rush to complete projects before a change in China's solar pricing mechanism took effect.

The contraction threatens to deepen losses at the world's largest solar manufacturers, which have already reported billions of yuan in red ink over the past two years. Xinyi Solar Holdings Ltd. said it expects interim net profit to swing to a loss of no more than 50 million yuan, highlighting the severity of the downturn across the supply chain.

Overcapacity Pressures Mount Across the Supply Chain

China's solar manufacturing capacity has expanded rapidly in recent years, far exceeding domestic and global demand, the CPIA has said in prior reports. The resulting glut has pushed module and component prices below production costs for many producers, contributing to the immense losses that manufacturers have recorded over the past two years.

Export Markets Face Growing Trade Barriers

Chinese manufacturers have increasingly relied on overseas markets to absorb excess inventory, driving global solar panel prices lower. But trade barriers are mounting, limiting the ability of Chinese producers to offset weak domestic demand through exports.

The solar supply chain faces a prolonged downturn with no clear near-term catalyst for recovery. Xinyi Solar, which warned of a swing to loss, reflects the broader pressure on manufacturers. The CPIA's refusal to provide a 2026 forecast suggests the association sees further downside risk. Investors should watch for capacity closure announcements and potential policy support as possible turning points.

This article is for informational purposes only and does not constitute investment advice.