At the height of the global recession a small group of men went on a pilgrimage to the birthplace of the Red Army in the remote Jinggang Mountains. There, Yingli Green Energy CEO Miao Liansheng demanded that his management team swear a sacred oath before he led them into the battle ahead.
Miao is the founder of China’s third largest solar panel maker. That puts him at the epicentre of an industry hit hard by the economic crisis: Spain, France and Germany have all cut solar power subsidies.
Miao, a 53 year-old People’s Liberation Army veteran is no stranger to struggle. Like a number of other China CEO’s, he’s heavily influenced by military ideas. His employees must parade every morning and undergo self-defense training, reports Global Entrepreneur magazine.
Ideas on warfare permeate the company. “We must learn to be flexible and mobile,” he tells his sales team, “following the strategies and tactics of Chairman Mao.”
Miao joined the army at 13, and stayed for 15 years. He started the Baoding-based Yingli shortly afterwards, and he credits his success to an accurate take on government policy. He read in a newspaper that the government was going to back solar energy and promptly moved Yingli into solar panels in 1993.
A close relationship with the Communist Party was also helpful. In one story, Miao once tested the loyalty of a prospective employee by telling him he had to quit the Party if he wanted to join a private enterprise. When the interviewee demurred, Miao introduced Yingli’s party secretary listening nearby. “If you had agreed with [Miao] to quit the Party,” the eavesdropping bureaucrat warned, “I would have expelled you straight away.”
Keeping in with the right people is important: the solar industy still relies on state support for survival. “While the cost of coal generation is [$0.04] per kilowatt, the solar energy generation cost is relatively high at [$0.29] per kilowatt,” according to Samsung Economic Research Institute researcher Liu Shiyang. “An effective revenue model can only be created with government support.”
Miao’s response to the economic crisis has been to cut prices 27%. Perhaps too far: when the government asked the industry to quote the price at which it thought new solar power stations could viably sell electricity into the grid, Yingli estimated just Rmb0.69 ($0.10) per kilowatt hour. That was a price many of his competitors derided, at less than a third of the industry’s average cost. A ‘below-cost’ sales strategem? Yingli’s own Chief Strategy Officer Ma Xuelu later admitted the price was a tactical one.
It’s an accusation foreign companies have also levelled against their Chinese rivals. There are complaints of excessive state support, and the dumping of surplus panel production into international markets. China produces nearly a third of the world’s solar panels, but exports an estimated 98% of them.
Low-cost production often comes at the expense of the local environment. Shi Jun, CEO of Shanghai-based Pro-Enertech estimates that it costs $84,500 to produce one tonne of polysilicon (a core component of panel design) if the chemical run-off is properly recycled. But he says that Chinese companies produce it for up to three-quarters less.
“It is like dynamite,” says Hebei School of Material Sciences Professor Ren Bingyan, “it is poisonous, it is polluting, [and] human beings can never touch it.” Towns in Sichuan and Fujian provinces have already been contaminated. “If this happened in the United States”, says Shi, “you’d probably be arrested.”
Still, the Ministry of Finance announced a raft of measures last year to promote domestic use of solar power, including subsidies for new projects. But just a few months later, amid concerns on overcapacity in polluting industries, restrictions were imposed again. Miao’s team managed to double Yingli’s market share to 5% in 2009, but his battle is far from over.
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