By Tang Guhan
The stock prices for photovoltaic stocks slumped this week after Chinese authorities announced they would scale down the subsidies for photovoltaic power generation on May 31.
Securities analysts believed the stock market was reacting with too much pessimism.
The new policy focused on cutting subsidies and controlling the scale for photovoltaic projects to improve their efficiency and to deleverage the photovoltaic industry.
The direct influence will be reflected in the reduction in operating income of companies' financial reports and the suspensions of construction plans, as noted by people close to the matter.
It is believed to be good news for the photovoltaic giants, as they will grab more market shares by leveraging their technical and low-cost advantages, Chinese institutions said.
Some photovoltaic companies called on the government to slow down the subsidies-cutting process recently as the industry would bear significant losses after breaking away from the government support.
The gross profitability is predicted to plunge for photovoltaic companies after the enforcement of the new policy, while it will still be profitable for the photovoltaic giants.
Analysts believed the new policy would prompt innovations in related companies and government subsidies could not guarantee long-term prosperity for a certain industry. China has already advanced in the world in this field.
On the other hand, the move will be beneficial for the photovoltaic companies expanding their businesses abroad.
Leveraging innovative technologies and application experiences, the Chinese photovoltaic industry has been expanding abroad rapidly in recent years with an annual growth rate exceeding 50 percent, especially in areas like Europe, the Middle East, and South America, among others.
