As a tremendous change in economic taken place in China within the past few decades, Chinese solar industry is transformed into the main producer of electricity, possessing the most shares in the international market. With the pressure continuously exerted by Chinese solar industry, American solar power companies are forced to field for bankruptcies. Why would Chinese economy rise rapidly? Its success can be ascribed to its low-cost structure: low-rates loans , cheap and free land, and extensive tax breaks.
As we learned in microeconomic course, lower input costs lead to higher supplies. As the supply increases while demand remains constant, solar panel price has plunged sharply. This theory can be applied into this case in a sense that chinese manufactures operating with a low cost increase the supply and pull down the world-price dramatically. As a result, U.S. solar industry which holds a high producing cost cannot accept this low price and thus fades out gradually. Meanwhile, Chinese solar companies who take advantage of this low-cost structure still stay in the market. There is no doubt that the endless power of cost advantage is a deadly weapon in the crucial battle.
Reference: New York Times