China's industry ministry has issued draft rules aimed at tightening investment regulations for solar photovoltaic (PV) manufacturing projects to address overcapacity in the sector. Under the new regulations, projects must have a minimum capital ratio of 30%, an increase from the previous requirement of 20% for most PV projects and 30% for polysilicon manufacturing projects. Although the ministry did not specify the definition of the capital ratio, it generally refers to the percentage of total investment contributed by shareholders' own assets.

The guidelines are designed to steer the development of the solar PV industry but will not be binding for project approvals. Albert Miao, head of HK China energy transition and commodities research at Macquarie Capital, described the new rules as a small step in the right direction, noting that future policies from relevant government authorities will be crucial to watch. He emphasized that market-driven supply cuts across the solar supply chain will be essential to rebalance the market and increase prices.

The draft regulations also set minimum efficiency levels for various types of solar panel technologies, aiming to curb further expansion of manufacturing capacity, eliminate outdated capacity, and promote sector consolidation. Jessica Jin, principal research analyst for solar PV at S&P Global Commodity Insights, highlighted that the goal of these measures is to streamline the industry and enhance overall efficiency.