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Premier says China to curb 'blind expansion' in wind and solar

Beijing will promote new energy sources but wants to control ‘blind expansion’ in the wind and solar industries, Chinese premier Wen Jiabao says in a speech today.

Opening the National People's Congress – the annual meeting of China's parliament – Wen says tackling the problems of “imbalanced, uncoordinated, and unsustainable development" is the government’s most urgent task.

Beijing cut the GDP growth target for 2012 to 7.5% – the first time it dropped below 8% in seven years – as China seeks to transform its economy away from low-value exports and towards more sustainable growth.

The Chinese premier says the government will promote strategic emerging industries, but emphasises that it will also “put an end to blind expansion in industries such as solar energy and wind power”.

Dave Dai, analyst at Daiwa Securities, believes the government was referring specifically to oversupply in the wind and solar equipment sectors, with today’s speech marking the third time the government has stressed this problem since the National People’s Congress in 2010.

China’s wind turbine manufacturers are thought to number around 80, with production capacity far above domestic demand. This has driven prices down by around 20% in each of the last three years.

Despite calls for increased consolidation, industry observers say new players continue to bid aggressively for contracts in public tenders, keeping prices low.

China’s two leading turbine makers – Sinovel and Goldwind – are both set to report a hefty drop in profits for 2011, partly as a result of this competition.

The government will release further details on its support for the renewable energy sector in a plan after the congress closes.

Wen also says Beijing will increase its efforts to reduce emissions and conserve energy. It plans to cut energy use per unit of GDP output by 3.5% this year, despite missing the same target in 2011.

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