China has used offers of generous subsidies to amass the world’s largest array of wind and solar power.
“Without China’s subsidies, the renewable industry wouldn’t be in the position that it is today to compete with coal on price alone,” said BOCOM International Holdings Co. analyst Louis Sun.
Why is this a Problem
While China is moving away from subsidies for new projects, the country hasn’t been paying its full subsidy bill for several years now, and the mountain of debt keeps growing higher.
Estimates state that the debt could grow to $151 billion by 2032 without policy change.
Why This Matters
The backlog of delayed payments is weighing on developers and restricting their ability to borrow more money to fund new generation.
The lack of payments has become a major concern for investors causing a low valuation of Chinese firms. This restricts them from issuing more equity to fund new projects, leading to a rash of privatizations on the Hong Kong Stock Exchange.