China's Ministry of Industry and Information Technology (MIIT) convened a critical meeting with leading solar industry executives last week, signaling a decisive government intervention to curb "disorderly" competition and steer the sector towards more sustainable, quality-driven growth. The move, which saw solar stocks surge across mainland China and Hong Kong, directly implements directives from the Central Financial and Economic Affairs Commission aimed at addressing irrational pricing and overcapacity within the world's largest photovoltaic manufacturing base.

Chaired by MIIT Minister Li Lecheng, the high-level session included representatives from 14 major solar companies, including Longi, Tongwei, GCL, Trina, JA Solar, and Sungrow, alongside the China Photovoltaic Industry Association (CPIA). This meeting followed the Central Committee’s sixth economic policy discussion on July 1, where senior officials emphasized the urgent need to eliminate outdated production capacity and enhance industrial quality. Minister Li underscored the necessity for the industry to "firmly implement the central government’s decisions, resolutely crack down on low-price disorderly competition, and promote the orderly exit of outdated capacity," urging companies to prioritize innovation, product quality, and long-term competitiveness over volume.

The government's actions are set against a backdrop of broader national discussions regarding "involution," a term describing highly competitive yet inefficient environments. Prior to the MIIT gathering, the state-run People’s Daily published a front-page commentary that sharply criticized destructive price wars, advocating for structural reforms to restore market order and foster healthier competition.

Early market adjustments are already evident across the supply chain. In the solar glass segment, a consortium of 10 manufacturers, including industry giants Xinyi Solar and Flat Glass, announced plans to reduce production by 30% in July to mitigate severe oversupply. Concurrently, consolidation appears to be gaining traction in the polysilicon sector. GCL Technology’s co-CEO recently indicated that large producers are actively exploring mergers and acquisitions to absorb smaller, less competitive entities. Daqo New Energy echoed this sentiment in a July 1 statement, expressing openness to collaborative solutions. These developments come as polysilicon prices have remained below production cost for over a year, leading to at least four producers suspending operations in the first half of 2025, according to the China Nonferrous Metals Industry Association.

Investor sentiment responded swiftly and positively to these policy signals. Following the MIIT meeting, shares in nine Chinese solar companies, including Tongwei, Flat Glass, and Eging PV, reached their daily trading limits on July 3. Daqo Energy experienced a gain exceeding 15%, while GCL’s Hong Kong-listed shares climbed by 9%. Despite this immediate market enthusiasm, analysts remain cautious regarding the ultimate pace and scale of the impending restructuring. While central policymakers have clearly articulated their intent, overcapacity remains deeply embedded across China’s extensive solar value chain. Experts suggest that comprehensive restructuring efforts within silicon, wafer, and module manufacturing could require several months, if not years, to fully materialize and yield their intended effects.

The government's unequivocal stance marks a pivotal moment for China’s solar sector. Once celebrated as a prime example of successful industrial policy-driven expansion, the industry is now under significant pressure to transition from a volume-centric growth model to one focused on quality, efficiency, and sustainable consolidation.