Summary

Chinese companies have already shown they are quite capable of using backdoor tactics to avoid their earlier price-raising agreement with the EU.

When that backdoor appeared to be closing, they simply tried another one by setting up these offshore shell factories.

The bottom line is the status quo is likely to continue for at least the next few years, even as the US, EU and China start to phase out government incentives for building solar power plants.

That means Chinese-made solar panels could ultimately get squeezed out of the US and Europe as loopholes close that were allowing a continued flow of products.

Bottom line: The EU's extension of punitive tariffs on China-made solar panels shipped through shell factories in Malaysia and Taiwan could kill a recent wave of offshore factory construction by Chinese manufacturers.

A recent offshore movement by Chinese solar panel makers seeking to avoid western anti-dumping tariffs could come to a sudden halt, with word the European Union (NYSEARCA:EU) is extending its previously announced punitive duties to Taiwan and Malaysia. The EU's ruling means it believes that many of the offshore solar panel plants recently built by Chinese manufacturers are little more than shells designed to hide the true origin of their products.

This story dates back three years, and began when the EU levied anti-dumping tariffs on Chinese-made solar panels after determining manufacturers were receiving unfair government support via policies like cheap land, low-interest loans and export rebates. Chinese manufacturers quickly agreed to raise their prices to levels comparable to those of western rivals in a bid to avoid the tariffs. But then they almost immediately began to violate the spirit of that agreement by offering discounts to buyers in other ways.

The EU is in the process of investigating claims of such violations to that agreement, and this latest development involving panels made in Malaysia and Taiwan shows the EU isattempting to stop another way the Chinese are avoiding the tariffs. The latest reports say the EU has officially said that all panels made in Malaysia and Taiwan will be subject to the same punitive tariffs as panels made in China

• [Editor:tianyawei]