For nearly two years, China has been waging an intense campaign to eliminate severe overcapacity in the solar industry – an issue that has sparked vicious price wars, undermined domestic firms’ bottom lines, and fuelled protectionist policies overseas.

The mismatch between rhetoric and outcomes is particularly stark in China’s market for solar glass – a core component for solar panels – where industry insiders say some firms have flouted the “anti-involution” campaign by illegally expanding production.

Illicit production lines are so numerous that China’s solar glass production is about 5 per cent to 10 per cent higher than the industry’s total permitted capacity, according to an industry veteran from the Chinese Architectural and Industrial Glass Association, who asked not to be identified due to the sensitivity of the matter.

Beijing has introduced tough policies in an attempt to eliminate overcapacity, with the Ministry of Industry and Information Technology enforcing strict “capacity quotas”. China’s solar glass industry now has a permitted capacity of just over 80,000 tonnes per day, down from a peak of nearly 130,000 tonnes in 2024, the insider estimated.

However, some factories simply ignored the new rules – either breaking ground without obtaining quotas or building production lines that exceeded their approved capacity. Often, they did so with the tacit consent of local governments, which wanted to “attract hi-tech companies to boost the local economy and tax revenues”, the person said.

Timing has also been a factor. In 2020 and 2021, China’s solar glass industry experienced a “gold rush”, as prices soared to about 40 yuan (US$6) per square meter, giving producers a hefty profit margin on costs of 13 yuan. That led a wave of firms to set up factories, “including companies with no background in glass manufacturing”, the insider recalled.