Obtaining the share of export by bidding is beneficial to the improvement of Chinese export enterprises ' profitability

Absrtact: Opinion to obtain the export share by bidding, not only is advantageous to the Chinese export enterprise profit ability enhancement, also is advantageous to the Chinese PV Enterprise's fittest. And can avoid enterprises to use policy arbitrage, and then overcapacity, social funds are

Opinion

To obtain the export share by bidding is not only beneficial to the improvement of Chinese export enterprises ' profitability, but also beneficial to the fittest of Chinese PV enterprises. Moreover, enterprises can avoid the use of policy arbitrage, and then overcapacity, social funds have been a huge waste of the phenomenon reappear.

August 6, China's photovoltaic industry exports photovoltaic products to the European Union began to implement a provisional agreement between the two sides, of which the price is not less than 0.56 euros/watt, all Chinese imports into the EU, the amount of PV products must not exceed 7GW. The most important thing for China's PV companies now is how to get a bigger share of the 7GW quota.

There are reports that the domestic allocation of quotas is still under discussion. The current formulation of the distribution scheme could be seen as a "CMCNA" programme, where 60% per cent of the share was based on historical export data, 30% would be allocated to 36 defence enterprises and 10% to smaller enterprises. The latest news is that "CMCNA" has become "6.5:2.5:1".

60% or 65% is based primarily on past historical data, seemingly fair, but in the past, Chinese photovoltaic enterprises in the way of price war to obtain market share, if given to these enterprises more than 60% of the main export share, is tantamount to recognition of the past enterprise price war behavior, for other industries after a bad precedent. Therefore, in the distribution of shares, even if not to punish those in the past price war enterprises, it is absolutely not condone or encourage enterprises to carry out price war. From this perspective, this allocation mechanism is undesirable.

It is also unreasonable to allocate shares by responding. Who should Sue, who benefits, seemingly reasonable, but the premise is to be sued so that the entire industry benefited from the use of this rule. In fact, some companies to respond to this agreement with the European Union, there is no significant impact, according to this principle to allocate a portion of the share is not reasonable. Moreover, in those who should be sued among enterprises, how to allocate 30% or 25% of the share, is also a problem, between enterprises may be resorted to various ways to gain share, latent rent risk.

The remaining 10% per cent to small businesses also seem to take care of small businesses, but it is equally difficult to distribute this share equitably among small businesses.

In short, the allocation mechanism with administrative or planned should be abandoned.

If the market mechanism is followed, the share problem can be settled fairly. For example, you can set up a trade association in China, the nature of the PV export share management Provisional Institutions, who export photovoltaic products to the EU, the association to apply for the open competition between enterprises share, the highest bidder. Of course, the price must be higher than 0.56 euros/watts, or the association regularly or irregularly open organization of the auction, the price of the highest share. What needs to be supervised is that the real export price of the highest bidder must be no less than the bid price.

In this way, if a company wants to get a quota, it needs to quote a high price, and to win the market, it must make the prices not go too far. The two-phase tradeoff is conducive to the formation of a more reasonable price system. This kind of bidding method is beneficial to improve the Chinese PV industry's trade image in the EU, not only to improve the profitability of Chinese export enterprises, but also benefit the fittest of Chinese PV enterprises and promote the benign development of PV industry. More importantly, it can also avoid the local government preferential policies, enterprises use policy arbitrage, and then overcapacity, social funds have been greatly wasted phenomenon again.

-Chen Donghai