The large PV enterprise in Wuxi of Jiangsu province is bankrupt. The Chinese government and entrepreneurs should reflect on the negative role played by the government behind the scenes, says an editorial in China Business News. Excerpts:
The bankruptcy of Suntech Power's Wuxi subsidiary was almost predictable. The sharp decline of market demand is the direct cause. But its excessive production capacity and rapid expansion is the fundamental cause.
Several years ago, the Chinese government decided to promote the development of new energy technologies and industries. This was the right decision. But when local governments implemented the central authority's decision, they paid too much attention to the fast growth and expansion of the industry. The governments provide many favorable policies in tax, land use and direct government subsidies.
It seemed to the officials that as long as it is a new-energy industry, the faster the enterprises will grow, the brighter their future will be. But the global financial crisis and trade protectionism measures suddenly changed the international market. The large production capacity of Chinese enterprises has become a heavy burden of the enterprises. Yet the government will not pay the debt of bankrupt enterprises, even if they strongly supported the enterprises' expansion at first.
The Chinese government should draw lessons from the bankrupt Wuxi Suntech and rethink its role in market and industrial development because the loss saddles not just businesspeople, but taxpayers as well.
The people should not pay for the government's shortsightedness and miscalculations.