China to strongly repulse US ban on Xinjiang’s solar panel material companies

A view of Xinjiang Daqo Photo: Zhang Dan/GT

China on Thursday vowed to take all necessary measures to firmly safeguard the legitimate rights and interests of Chinese companies following the latest US crackdown on solar panel material producers based in Northwest China's Xinjiang Uygur Autonomous Region, which produces around half of the world's polysilicon.

Lawyers and experts encouraged relevant companies and the Chinese government to strongly strike back at the US' unreasonable and baseless accusations after the US has obviously become aware of the sanction benefits of its "industry genocide" targeting businesses of Xinjiang's cotton and tomato.

Highly automated industries in Xinjiang shatter Western "forced labor" lie Infographic: Deng Zijun/GT

The fabricated "forced labor" issue in Xinjiang is contrary to reality and the accusation is "the lie of the century," the Chinese Commerce Ministry and Foreign Ministry said on Thursday in separate remarks.

The US should immediately redress their actions, or "we will take necessary measures to resolutely safeguard the legitimate rights and interests of Chinese companies and institutions," said Commerce Ministry spokesperson Gao Feng.

The US Commerce Department on Thursday put Hoshine Silicon Industry (Shanshan) Co, and three other Chinese companies - Xinjiang Daqo New Energy Co, Xinjiang East Hope Nonferrous Metals Co and Xinjiang GCL New Energy Material Technology Co, as well as the Xinjiang Production and Construction Corps on an Entity List, citing the baseless claim of "forced labor" in the region.

The Biden administration on Wednesday separately blocked imports of Hoshine Silicon Industry, US media reported.

Despite having shown automated production of polysilicon in its Xinjiang plant to Western financial institutions and media outlets like Bloomberg and Financial Times in May to debunk the "forced labor" allegations, Xinjiang Daqo was named on the US Entity List.

"Considering the US photovoltaic (PV) market only needs 10 percent of the world's polysilicon, we don't believe it will create a significant impact on our businesses," Xinjiang Daqo told the Global Times on Thursday.

Reaffirming the company's "zero tolerance on forced labor," it said it has neither sold any products directly to US companies nor purchased any US products.

Xinjiang Daqo obtained approval to get registered on the Shanghai tech-heavy STAR market on Tuesday after its parent firm Daqo New Energy tumbled at the New York Stock Exchange partly because of the groundless US accusations. Shares of Daqo New Energy dropped around 4 percent to $55.7 in trading on Thursday morning session (US time).

A staff of the investor relations sector at Hoshine Silicon told the Global Times on Thursday that the company is gathering information about the impact of the US ban on its downstream customers, noting the company's sales proportion in the US market was small.

Xinjiang region contributes around 45 percent of the world's supply of polysilicon. As energy consumption is one of the key factors affecting polysilicon manufacturing, competitive electricity prices in Xinjiang, North China's Inner Mongolia Autonomous Region, Southwest China's Sichuan Province, Northwest China's Qinghai Province and Ningxia Hui Autonomous Region make these regions attractive.

According to Hangzhou-based industry website pv.china-nengyuan.com, the polysilicon output in Xinjiang is expected to hit 300,000 tons this year, which could satisfy the solar energy demand of 60 gigawatts (GW). It is notable that China's domestic PV module demand will reach 60-70 GW in 2021 as the country is striving to realize its "carbon peak" and "carbon neutrality" goals.

Unlike targeting Xinjiang's cotton and tomato, the US sanctions on the region's solar panel materials is not a whim as the past decade witnessed how the US solar industry went downhill while growth in China's solar energy sector forged ahead, industry observers said.

They noted even if non-Xinjiang regions have the capacity to produce polysilicon, the higher costs and other disruptions would appear in the global solar supply chains under the US ban. For instance, the old facilities and polysilicon manufacturing equipment at foreign companies including REC Group, OCI Solar Power and Hemlock would create increasing uncertainties to the global solar industry.

China became the world's largest polysilicon producer in 2020 with an output of 396,000 tons. Its global output share climbed to 76 percent of the world total, up 8.7 percentage points, according to data from the China Photovoltaic Industry Association.

The latest ranking from German research firm Bernreuter Research said seven of the world's top 10 largest polysilicon producers are based in China and only one is American.

Legal weapons

In the face of the latest US sanctions, lawyers and experts encouraged relevant Chinese companies and the government to take strong countermeasures.

"Chinese companies could make their utmost effort to fight for their rights and interests as the polysilicon industry is a capital- and technology-intensive sector, instead of a labor-intensive one," Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing, told the Global Times on Thursday. Without tangible evidence of "forced labor" found in these factories, such a lie will collapse, Gao said..

Guan Jian, a partner at Beijing Globe-Law Law Firm, told the Global Times on Thursday that these private Chinese companies could apply for the removal from the US Entity List within the US legal framework.

The removal of Chinese smartphone maker Xiaomi from the US government blacklist in May is seen as a victory by many Chinese companies, saying it has set an example for them of how to counter the irrational crackdown by the US government by adopting legal avenues.

In addition to Chinese companies, analysts noted that China's Anti-Foreign Sanction Law, which was enacted on June 10, has offered more tools to block sanctions from the US or other countries that may follow the US.

According to Article 12 of the law, any organization or individual that implements or assists in implementing the US sanctions against China can be sued by Chinese companies and individuals for violating the law and will be required to cease infringement and pay compensation, Yang Yonghong, a law professor at Southwest University of Political Science and Law, told the Global Times on Thursday.

Politicians, industrial lobbyists, individuals from companies as well as relatives of these people who have been involved in pushing for the US sanctions against China will be sanctioned with their entry to China denied, asset frozen and businesses within China restricted, Yang said.

The US has no legal basis for taking unilateral sanctions on other countries under the excuse of "human rights," and in recent years, the US has weaponized and politicized "human rights" - more frequently using it to bully other countries, Yang said, noting that the "US is using human rights as an excuse to practice hegemony" and most of the developing countries in the UN have expressed opposition to unilateral sanctions.

In a meeting held at the UN headquarters in New York on Wednesday, 184 countries voted in favor of a resolution to demand the end of the US economic blockade on Cuba, for the 29th year in a row.

Yang pointed out that some special rapporteurs of the UN Human Rights Council have expressed concern on human rights made by US coercive sanctions on some countries.

In December 2020, Alena Douhan, a special rapporteur on the negative impact of the unilateral coercive measures on the enjoyment of human rights, called on the US to remove unilateral sanctions which may inhibit the rebuilding of Syria's civilian infrastructure.

EU market more essential

Although it is uncertain to what extent the new US ban would disrupt China's solar industry supply chain and Chinese solar companies' acquirement of the raw materials, some companies have raised concerns of prospective exports to the EU market - a major market for Chinese solar panel makers.

According to the China Photovoltaic Industry Association, China exported 17.4 percent of the solar modules produced in the country to the Netherlands in 2019-20, 12.7 percent to Japan, 5.1 percent to Spain, 3.9 percent to India and 3.3 percent to Germany.

"The most worrisome consequence of the US ban on China's solar panels would be a follow-up crackdown by the EU. That may lock many Chinese solar makers within the country," Guan warned.

However, Gao said that the EU does not have the impetus to follow suit because the Europeans have already become embattled and worried about the fate of the China-EU bilateral investment treaty because of the Xinjiang cotton issue.

China could impose sanctions on representative individuals or companies in the EU if the bloc bans Chinese solar panels, he noted.

When major countries are ramping up efforts on the climate change agenda, China's domestic demand for solar panels is also huge.

Calling for unity by domestic solar companies from upstream to downstream, Pan Cunxiang, secretary general of the Nonferrous Metal Industry Association in Xinjiang, told the Global Times on Thursday that the Chinese solar companies should not fall into disorder following the US crackdown.

"We should first satisfy the great domestic demand," Pan said.