Business: Regime panned for choking growth Chinese developers defend sector

The Chinese government is misguided in believing it must act to cool down an overheated wind power sector, say several of the country's leading wind farm owners and project developers.

They dispute claims that production capacity for turbines is now outstripping demand and that more electricity is being generated by wind stations than is needed. "I don't believe we have a problem of over-capacity," says Gui Kai, vice-president of Guoha Energy Investment. "It is just a very normal situation in a new market." His company will be operating 1.4 GW of wind turbines by the end of the year, says Gui, putting it among the world's top dozen wind farm owners.

Gui, speaking at Beijing's China Wind Power 2009 conference and exhibition, held October 21-23, made his views public in reaction to the government's announcements during the week that it will hold back funding or approval for projects in industries with production over-capacity and put a ban on land use permits. Other leading wind farm developers participating in the conference shared Gui's views that wind power should not be included in the government's drive to slow down overheated sectors, even though wind turbines are now being made by about 80 companies in China.

A far bigger concern in China is raising the level of wind sector management to a much higher level and having a good selection of quality technology to choose from, said Gui. The talk of over-capacity in turbine manufacturing is a "micro problem" in comparison. "If they are not producing what we want, they will not survive," he said.

In reality, commercial wind turbines are only available in China from about five companies, said Fang Zheng, general manager of China Huadian New Energy Development, an offshoot of one of China's five big electric power companies. In total there are about 20 players, he told delegates.

"Is this really an over-capacity issue?" Fang said. "In a market economy we need the process of competition to rule out weak playersWe have not entered into the full over-capacity stage. This is just the initial stage of a new industry. We will not find the best manufacturers until we reach the end of the competition cycle." It is necessary to let a competitive economy choose the best players, not the government, he said, adding: "Don't hurry to the conclusion that this is an overheated market. Let competition work. Let's wait and see."

While lack of local demand for electricity means groups of turbines in several wind farms in China are currently shut down, Fang said this was not an over-capacity problem, given that wind power represented just 1% of total installed generating capacity in China at the end of 2008, producing just 0.6% of electricity. The problem is not too much wind power coming online too fast, said Fang, but lack of capacity in the grid network and no links between the provincial electricity networks. He said grid congestion is particularly acute leading out of the major wind power areas of Inner Mongolia and Xinjiang province.

Gui, Fang and others raised their voices within hours of the government listing wind power among seven industries that it believes are growing too fast. The day prior to the conference opening, a front page article in the China People's Daily, the official newspaper of the national Communist Party, reported that, despite the economic slowdown, production over-capacity still exists in steel, cement, glass, coal, the chemical industry, polysilicon production and wind power equipment. "Taking that out of the system is now seen as crucial to keeping the recovery moving," said the newspaper.

Order to stop investment

Orders from Xiong Bilin, deputy director general of the Industry Department of the National Development and Reform Commission (NDRC), are for provincial governments to withhold investment in the named industries. "Banks have been told not to lend money to projects that violate government guidelines," says the NDRC, which has the backing of nine other ministries. "Those projects are also barred from raising money for unauthorised expansion through either bonds, short-term bills, medium-term notes, convertible bonds or equity offerings."

Three days later, with the China Wind Power conference in full swing, the Communist Party newspaper further reported that China's land and resources ministry would be acting to "resolutely restrain over-capacity and repeated construction in some industries" by using its land administration and shared macroeconomic control powers. Also, no land may be provided for industries with over-capacity without the approval of the State Council, including wind power. Somewhat incongruously, however, it said: "Land for the industries with high technologies, high added value, low consumption, low emissions, new techniques and new products must be guaranteed first."