How to prevent "involutionary" vicious competition is a multiple-choice question.
On October 14, the official microblog of the China Photovoltaic Industry Association (CPIA) released a message stating that the photovoltaic industry has reached a consensus on "strengthening industry self-discipline and preventing 'involutionary' vicious competition."
It is reported that the association held a relevant symposium in Shanghai, discussing three major agendas: first, discussing the industry self-discipline convention on "anti-involutionary competition, anti-below-cost dumping" and other content; second, orderly resolving supply and demand imbalances and clearing excess capacity and other related measures; third, other suggestions for guiding the healthy and orderly development of the industry.
In recent years, the four major links of photovoltaic silicon materials, silicon wafers, cells, and components have basically broken through the cash cost, and the entire industry chain is under pressure. The performance of the industry's explosive bombs and the industry-wide losses are the important background for triggering the photovoltaic industry association to respond to the central spirit and prevent "involutionary" vicious competition.
In fact, since last year, relevant departments including the Ministry of Industry and Information Technology and the China Photovoltaic Industry Association have frequently organized various symposiums and introduced relevant management methods to standardize the behavior of enterprises in the photovoltaic industry and avoid vicious competition. However, so far, the effect is quite limited, and the latest data show that the average price of double-sided double-glass monocrystalline silicon photovoltaic components has been reduced to 0.64 yuan/watt, and even a low price of 0.53 yuan/watt has appeared in the relevant bidding prices.
Advertisement
Faced with the pressure of insufficient effective demand and insufficient capacity utilization rate, the problem of involutionary competition faced by the photovoltaic industry is actually a high concentration of current economic issues in China. This also means that how to do a good job in the right-side governance of economic and industry cycles is a general proposition facing the photovoltaic industry and even the Chinese economy, and both photovoltaics and the entire economy are facing a deep test of not breaking and not establishing.
At present, as a self-discipline organization, the industry association has undertaken the important responsibility of standardizing market competition order and guiding market entities to do the right thing, such as clearing excess capacity and guiding the industry to develop healthily and orderly, which should be said to reflect the industry's consensus.
Of course, excavating and reaching industry consensus is one aspect, and turning it into credible, feasible, and operable actions is the top priority. Taking the three specific agendas supported by the China Photovoltaic Industry Association as an example, it is not difficult to find that there is a problem of knowing it is easy to do it is difficult.
For example, "anti-involutionary competition, anti-below-cost dumping", based on the industry consensus description is easy to understand, but these state expressions lack credibility and feasibility. Because involutionary competition, below-cost dumping, is not a strict concept expression, it is difficult for all parties to quantify in real operations, and it is even more difficult to decompose into non-disputes action plans.
In fact, the occurrence of industry-wide losses, strictly speaking, is not a market problem, nor is it a market failure, but mainly based on non-market factors, which are related to distortions in policies and systems, distortions in incentives, unfair competition in the market, and the market mechanism cannot play effectively.Whether it is the photovoltaic industry or any other industry, when issues such as low overall capacity utilization rates emerge, there is an underlying problem of market selection not functioning properly. If outdated production capacities cannot be effectively phased out and the market cannot clear effectively, it naturally leads to industry-wide losses and self-destructive price wars.
It is evident that initiatives against dumping below cost, while seemingly reasonable, are in fact mechanisms that lack boundaries and a sense of proportion. They can easily give the impression that the government and industry self-regulatory organizations are crudely interfering in the micro-decisions of businesses, and they lack operability because no one or organization can define collective costs.
To promote effective market clearing, industry self-regulatory organizations and governments must clarify the boundaries of their authority. For governments, strict property rights and competitive systems are essential arenas for action. The scope of activities for industry associations and other self-regulatory organizations is the spirit of contract.
Based on the quantifiable institutional analysis framework of recent Nobel laureates such as Acemoglu, property rights are primary, clarifying the cooperative game between the government and the market. Contractual systems are secondary, mainly focusing on the cooperative game among business entities. Both property rights and contractual systems are essentially about expanding the boundaries of action freedom for rights.
Therefore, whether it is industry organizations or government agencies, the content and behavioral logic of self-discipline and other-discipline must be guided by the degree of freedom of market entities in the market and the institutional transaction costs. Only market self-discipline and institutional constraints can better promote the full competition of rights in the market, keeping the market in a state of dynamic interaction and clearing, allowing the industry and the economy to develop healthily and orderly.
When one reaches the end of the water, one sits and watches the clouds rise. Currently, whether it is the photovoltaic industry or the entire economy, the core to breaking out of the dilemma of insufficient effective demand is to learn to manage on the right side of the cycle, which is to promote market clearing at a low cost and unblock the space for free market competition. Industry self-regulatory organizations must create an industry self-discipline environment based on contracts for businesses, and governments must provide a systematic business environment for enterprises, avoiding as much as possible providing specific advice and guidance for the actions of enterprises. This sense of boundaries is a necessary prerequisite for the economy to move steadily and for the market to undergo metabolism.
Leave A Comments