Solar energy is a booming industry and China is leading the way. There are good reasons to buy Chinese solar stocks.
Business website Motley Fool recently boiled it down to three reasons, despite some downturn in recent years: markets, innovation, and government deciding the winners.
Markets:
China is fast becoming the world’s number one economy. It has also increased fossil fuel use drastically. According to the EIA, China in 2012 consumed 49% of the world’s coal supply, nearly as much as the rest of the world. This has created a lot of problems, including air pollution, and carbon emissions.
However, the tide looks like its turning. Recently, the government announced plans to ban coal by 2020. Factor in China’s plans on adding 13GW this year. It’s ferocious appetite for solar continues to grow. This is vital as China plans its economic dominance while steering away from environmental disaster. Motley Fool summed it nicely about its companies growing domestically:
Chinese solar demand should be higher than American solar demand because China does not have the luxury of cheap unconventional natural gas.
More domestic demand should translate to more revenue and profit for Chinese solar companies.
Innovation:
Chinese innovation has played a key role in dramatically reducing solar costs. The trick is maintaining high levels of innovation, as Chinese workers continue to move up the “value added chain,” advancing their skills and knowledge, which Motley Fool points out. This will help to grow and evolve the industry.
Other Chinese companies through innovation have had success in other industries. BYD, China’s well-known electric vehicle manufacturer, has been successful by making deals providing electric vehicle fleets and buses to other emerging market countries. Currently, the company is the top Chinese auto manufacturer, and is tenth overall in the country. Innovation will give solid backbone in those Chinese companies looking to be in the solar game for the long haul.
Government “Picking” The Winners:
In countries were free markets decide who wins and who goes home, its different in China. Governments offer low-interest rates of credit to companies. This decides who will succeed and who does not. This can give potential global investors guidance on who to put their money on (and not).
Early Days But…
Sure, investors could be concerned about the uncertainty of China solar stocks. Last October Yingli Solar‘s share price was $8.13/share. Recently as August 4th, it was as low as $3.16/share. Trina Solar‘s share prices have fallen from highs of $18.34/share in March to $11.21/share August 4th. Ongoing trade tariff wars between China and the US have been an underlying cause in declining Chinese solar stock prices.
Despite the trade wars, the solar industry is still in its early days, as there is an increasing need for renewable energy globally and domestically. Add innovation and investors looking for bargains, now might be a good time to look at China solar stocks, before prices go up.
