Luchengming asks: Commander, greetings. I’d like to ask your thoughts on the future of the photovoltaic sector. Right now it looks like many domestic solar companies are nearly dead — there was just an announcement allowing M&A in the solar industry, but then nothing else followed.
Do you think more policies are coming to prop up the solar industry? After all, it wasn’t easy for the country to cultivate a globally dominant sector like this — they wouldn’t just let it die, would they?
Commander’s response:
Solar companies dying doesn’t mean the solar industry is dying. Every industry goes through 4 cycles. Right now, solar is in its 3rd cycle — the consolidation cycle. The small players gradually lose ground while the large ones acquire. What determines an industry’s fate is its leaders and its supply chain. The fact that industry leaders still exist proves the supply chain is intact.
In an industry’s early development, all kinds of subsidies and encouraging policies let a hundred flowers bloom. Once that phase passes, a bottleneck forms — and during the bottleneck, winner-take-most dynamics begin to emerge, eventually leading to mergers and acquisitions. Not just solar — electric vehicles are heading the same way. Aren’t many EV companies going bankrupt right now? But isn’t China’s EV industry gaining global dominance at the same time? The two aren’t contradictory.
Once an industry matures, the government can only do two things: first, use non-market forces to open larger markets. Second, use policy favoritism to ensure industry leaders hold an absolute advantage throughout the entire supply chain.
For individual companies, the government can’t save them. The government isn’t all-powerful — even policy intervention must follow industry cycles and market laws. You can temporarily nudge the direction, but ultimately you go with the larger cycle.
What you actually care about — is it the real economy, or financial markets? For the real economy, that’s the situation above. As for financial markets, beyond the industry dynamics and market cycles mentioned: the exchange rate is back to 7.26 — don’t read too much into it.
Watch next month’s China-Japan-Korea talks in Seoul to see what comes out of them — whether coordinated action can stretch Asian currencies against the dollar. This wave of harvesting Asian economies means the dollar can hold firm a while longer without cutting rates.
Luchengming: Commander, is there a short-term opportunity in the financial markets?
2024-05-27 06:12 — Commander replies to Luchengming: None at all!