What are the factors that enabled China to assume market leadership in the solar panel market? What ...

The market for solar panels is global, and firms in many countries are capable of producing the panels. Photovoltaic solar cells are based on a technology similar to that used to produce semiconductors, and most semiconductors are produced in East Asia with some production in Europe and the United States. Chinese manufacturers with conventional photovoltaic technology set the cost standard for the industry. Moreover, China maintained a lower dollaryuan exchange rate than if the market were allowed to set the rate, although China had allowed the exchange rate to rise somewhat in 2010.
Another factor in China's favor was its government. The Chinese government is authoritarian and can act quickly and decisively. The size of the Chinese economy also means that resources can be readily mobilized by government in the domestic capital and factor input markets. The Chinese government views renewable energy as an attractive industry for growth and also for dealing with China's substantial pollution problems and its high-energy usage. That the Chinese government would provide incentives for renewable energy companies, and even generous subsidies, was not surprising.
The market for solar panels in Europe and the United States slowed to a crawl in 2010, while the market in China grew at a rapid pace. Although the short-term prospects in the Unites States were modest, the longer-term prospects were substantial. Analysts anticipated a fivefold increase in the market for solar panels and related technologies over the next 5 years. For instance, General Electric, which was a major supplier of wind turbines, decided to become a major supplier of solar panels as part of its renewable energy strategy.
In April 2011, GE announced that it would build a solar panel plant with a capacity of 400 megawatts, making it the largest plant in the United States. GE's announcement followed its acquisition of PrimeStar Solar, which according to the Department of Energy produced the highest efficiency thin-film solar panels. The long-run prospects for solar panels anticipated by GE were soon after confirmed as Total SA of France, the world's sixth largest oil company, bought 60 percent of SunPower for $1.37 billion, representing a 40 percent premium above the company's share price.
The actions by GE and Total represented good and bad news for other solar panel producers. The good news was that two huge companies were optimistic about the growth of the solar panel market in the United States and worldwide. The bad news was that solar power start-ups now faced two more large competitors with deep pockets and access to alternative technologies.