China’s Crackdown on Solar Monopolies Signals Shift in Polysilicon Market Dynamics

Economic

Summary:

China’s regulators have warned top solar firms, including Tongwei and GCL, against monopolistic behavior amid ongoing industry consolidation, reflecting growing concerns over unsustainable price surges...

Regulatory Pressure Targets Polysilicon Giants

China’s solar industry, long considered a cornerstone of its green energy ambitions, is facing intensified scrutiny from domestic regulators. The State Administration for Market Regulation (SAMR) summoned six major polysilicon producers including Tongwei Co. and GCL Technology Holdings alongside the China Photovoltaic Industry Association, to address concerns over anti-competitive practices. The companies were cautioned against collusion on pricing, output, and sales coordination.

This intervention emerges in the wake of recent efforts by leading producers to consolidate the oversupplied polysilicon sector by launching a fund aimed at purchasing outdated capacity from smaller firms. While this initiative was originally welcomed as a remedy for the sector’s chronic supply glut, it also sparked sharp mid-year price hikes, prompting the regulator’s current warnings.

Consolidation Plan Faces Structural Challenges

The regulator’s meeting is now being interpreted as a direct rebuke of the aggressive consolidation blueprint. Analysts at BofA Global Research have expressed skepticism toward the initiative, noting that the fund’s potential to distort market competition appears excessive. Rather than delivering stability, the consolidation may be contributing to unsustainable pricing behavior and exacerbating losses elsewhere in the solar supply chain.

This concern is reflected in market reactions. Shares in Tongwei dropped over 3% in Shanghai, while GCL fell by more than 4% in Hong Kong following news of the regulatory warning. The swift decline suggests investor uncertainty over the long-term viability of the consolidation approach and mounting pressure for a more balanced restructuring strategy.

Imbalance in Solar Supply Chain Raises Red Flags

Recent data from the China Silicon Industry Association underscores the volatility affecting upstream materials. Polysilicon prices surged between 9.8% and 10.5% during the past week alone, while wafer prices also climbed by 8.4% to 9.2%. Yet these increases contrast sharply with falling production figures: polysilicon output in December fell to 1.32 million tons, down 28% year-on-year, and wafer production dropped to 47.7 gigawatts, down 14.2% month-on-month.

This pattern reveals a growing misalignment between supply and demand across the supply chain. While rising polysilicon costs suggest temporary pricing power among upstream firms, the lack of recovery in downstream component prices such as cells and modules has raised concerns about the sustainability of this model. Without coordinated recovery across all tiers of the value chain, profitability risks becoming overly concentrated and unstable.

Strategic Shifts: Diversification and De-subsidization

In response to cost pressures, solar companies are exploring innovations to reduce reliance on expensive inputs. Longi Green Energy Technology, for example, announced plans to substitute silver a costly component in its solar cells with more affordable base metals. Meanwhile, Jinko Solar reported a 20.56-megawatt module order from Australia, signaling continued international demand despite internal restructuring.

Over the longer term, industry analysts expect China’s solar sector to undergo broader reforms that include a redistribution of profit margins across the supply chain, tighter industry standards, and a gradual phase-out of supportive policies such as export tax rebates. These changes may reduce volatility but also raise entry barriers for smaller or less efficient players.

Causal and Correlational Dynamics at Play

The price surge in polysilicon is causally linked to supply constraints and consolidation plans, particularly the fund that incentivized capacity buyouts. However, the broader rise in wafer and cell prices is more correlational, supported by slight output reductions and cost pass-throughs rather than genuine demand growth. The regulatory response, while reactive, also reflects a strategic intent to prevent monopolistic control over critical inputs at a time when China is repositioning itself as a global clean energy leader.

The solar sector’s current correction phase reveals the limits of uncoordinated consolidation in resolving overcapacity. While the ambition to stabilize prices is valid, the risk of overconcentration and price manipulation has triggered regulatory pushback. Going forward, the industry will need to navigate a more complex terrain balancing innovation, regulatory compliance, and profitability while avoiding the pitfalls of monopolistic behavior that could undermine global confidence in China's clean energy leadership.

Source: Bloomberg

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James Riley

Remarks of Officials

Economic

Commodity

Political

Japan is launching a diplomatic blitz to counter China's growing leverage over critical resources, engaging with G7 nations and key regional partners. The move comes amid rising concerns that Beijing is weaponizing its control over the global rare earths market as a trade dispute between the two economic giants escalates.

A Diplomatic Push to Secure Alliances

Top Japanese officials are embarking on a series of high-level talks to build a united front. Finance Minister Satsuki Katayama is set to meet with her counterparts from other major industrialized democracies during a trip to the US, with critical minerals at the top of the agenda.

"The fundamental consensus among the G-7 nations is that it is unacceptable for countries to secure monopolies through non-market means," Katayama stated, highlighting that China's actions represent a crisis for the global economy and a serious economic security challenge.

Simultaneously, Defense Minister Shinjiro Koizumi is scheduled for discussions with his US counterpart. At home, Prime Minister Sanae Takaichi will host South Korea's Lee Jae Myung for a summit aimed at reaffirming the alliance between the two key US allies.

The Heart of the Dispute: Rare Earths and Trade

Tensions have been mounting since early November, when comments from Takaichi suggested Japan could use its military if China attempts to seize Taiwan by force. In response, Beijing has rolled out new export restrictions and initiated an anti-dumping investigation into a key chip-making material, prompting Japan to shore up support from its allies.

Japanese Chief Cabinet Secretary Minoru Kihara has publicly called for the smooth shipment of rare earths and food, responding to reports that Beijing is obstructing trade in these goods.

"I believe international trade in rare earths should proceed smoothly, and I consider this to be extremely important," Kihara said. "China's export control measures on rare earths and other materials have been ongoing for some time and are having a serious impact on the global supply chain."

A report from the Wall Street Journal, citing two Chinese exporters, indicated that China has already begun to restrict exports of rare earths and rare-earth magnets to Japan. However, a person familiar with the matter noted that a Japanese importer had not been notified of any halt in export procedures as of Friday afternoon. Finance Minister Katayama confirmed she would verify transaction details with Japan's customs authorities.

China's Broader Economic Pressure

Beijing's actions extend beyond rare earths. This week, China announced new export controls on dual-use items that could potentially enhance Japan's military capabilities. It also launched an anti-dumping probe into Japan's production of dichlorosilane, a crucial material used in semiconductor manufacturing.

Adding to the friction, Japan has lodged a protest against China's deployment of a mobile drilling vessel in the East China Sea.

Assessing the Impact and Path Forward

According to Japan's Trade Minister Ryosei Akazawa, it is difficult to assess the full impact of the new curbs on dual-use items, as their exact content remains unclear. He noted that China's rare earth restrictions, in place since April of last year, have already forced various Japanese industries to adjust production.

"We are currently scrutinizing the impact on Japan's economy," Akazawa said. "We intend to take necessary measures in a resolute and calm manner, after comprehensively considering the situation from various perspectives."

Japan's diplomatic calendar remains busy, with Takaichi's meetings with South Korea's Lee scheduled for Tuesday and Wednesday, followed by a visit from Italian Prime Minister Giorgia Meloni from January 15-17.

"The importance of Japan-South Korea relations and Japan-South Korea-US cooperation has increased significantly," Kihara emphasized, highlighting the plan for close communication and shuttle diplomacy to ensure stable relations.

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Economic

Geopolitical Escalation: From Buying Greenland to Mining It

President Donald Trump’s polar interest has transitioned from speculation to statecraft. His administration is in direct talks with Amaroq, a mining firm operating in Greenland, to explore joint investment in critical resources like gold, gallium, and rare minerals. While Greenland’s leadership has cautiously welcomed economic cooperation, they have drawn a clear line: Greenland is not for sale. As MP Aaja Chemnitz asserted, economic collaboration is possible, but sovereignty is non-negotiable.

This declaration comes just days before a high-stakes diplomatic meeting between U.S. Secretary of State Marco Rubio and Danish/Greenlandic officials, including Foreign Ministers Lokke Rasmussen and Vivian Motzfeldt. Though initiated by Denmark, Rubio is reportedly using the meeting to formally raise the idea of a Greenland acquisition, reviving the Trump administration’s long-standing ambition.

$2.8 Trillion and a New Cold Front?

A U.S. think tank has provocatively pegged Greenland’s "value" at nearly $2.8 trillion, though this estimate is speculative and lacks legal or economic consensus. Yet even discussing such a valuation sends powerful signals globally. It invites comparisons to Cold War-style land grabs, prompting European skepticism and drawing quiet yet keen observation from strategic competitors like Russia and China.

China, which declared itself a "near-Arctic state" in 2018, views Arctic access as vital to its long-term geopolitical strategy. Any U.S. military or resource foothold in Greenland could be seen as an encroachment, triggering countermoves and elevating tensions in an already fragmented global order.

U.S. Senate Pushes Back on Military Overreach

Amid the Greenland developments, the U.S. Senate passed a War Powers Resolution aimed at limiting further military strikes in Venezuela. This bipartisan move would require Trump to seek Congressional authorization before engaging in any future military action, signaling growing resistance to unchecked executive power in foreign affairs. This could indirectly constrain similar military maneuvering related to Arctic positioning.

Investor behavior reflects the geopolitical undercurrents. On Thursday, the Dow Jones Industrial Average rose by 0.55%, while the Nasdaq slid by 0.44%, indicating a rotation out of tech and into defensive stocks. In Europe, the Stoxx 600 fell slightly by 0.19%. Meanwhile, U.S. and global defense equities rallied, boosted by Trump’s proposal for a massive $1.5 trillion defense budget amid growing strategic uncertainties.

CLSA, a major investment bank, released its list of favored defensive and countercyclical stocks, citing concerns over "AI trade exhaustion" and macroeconomic instability. The shift suggests institutional investors are bracing for a volatile year, driven by policy risks and potential military escalations.

Tariff Legality Under Review: $150 Billion in Reimbursements?

The economic implications of Trump’s global moves may face a sharp legal test on Friday. The U.S. Supreme Court is expected to rule on whether the Trump administration’s use of the International Emergency Economic Powers Act (IEEPA) to levy tariffs was lawful.

If the court rules against the administration, it could force the U.S. Treasury to reimburse importers, potentially returning over $150 billion in previously collected duties. This would blow a hole in fiscal projections that underpin Trump’s expanded military and foreign policy agendas including potential Arctic operations. The decision could also set a new precedent on executive authority in trade.

What was once dismissed as an outlandish Trump soundbite is rapidly becoming a strategic flashpoint. As the U.S. engages with Greenland not just for resources but for control, the world watches closely. The intersection of resource politics, Arctic militarization, and sovereignty claims now defines one of the most surprising geopolitical stories of 2026. Combined with legal challenges on tariffs and military authority, the Trump administration is facing pressure on multiple fronts and the next few days could determine whether the Arctic becomes a new zone of cooperation or confrontation.

Source: CNBC

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Political

Venezuelan Oil Now Under U.S. Control, But Not Entirely

President Donald Trump’s declaration of control over Venezuelan oil fields faces a critical reality: a significant portion of those reserves are contractually linked to China. For years, Caracas relied on oil-for-loan arrangements with Beijing to keep its economy afloat. With Nicolás Maduro now removed from power, the legitimacy of these deals faces renewed scrutiny, especially as the U.S. has begun redirecting Venezuela’s oil flows through its own sanctioned channels.

The Trump administration has seized Venezuelan oil tankers and is initiating the sale of 30 to 50 million barrels from local storage, with profits to be returned to the Venezuelan people via U.S.-controlled accounts. This maneuver positions Washington not just as a political force, but as the de facto manager of Venezuela’s most critical export commodity.

U.S. Leverage vs. Chinese Exposure

China’s financial exposure in Venezuela is immense. Estimates place outstanding debts at a minimum of $10 billion, though the number could be higher due to delayed repayments caused by U.S. sanctions. The oil-backed loan structure has bound China’s interests to Venezuelan output, making current U.S. interference both financially disruptive and politically provocative.

According to Morgan Stanley, Chinese state-owned enterprises namely Sinopec and CNPC hold rights to over 4.4 billion barrels of Venezuelan reserves, more than any other foreign nation. These holdings are now in a precarious state as the new U.S.-aligned interim government may seek to void contracts previously negotiated under Maduro, thereby threatening China’s repayment pathway.

Strategic Balance Ahead of Trump-Xi Meeting

Despite these tensions, Washington seems cautious about provoking a wider dispute with Beijing. Trump is expected to visit China in April to reinforce a trade truce secured with Xi Jinping in late 2025. Analysts suggest that turning Venezuela into a geopolitical fault line would be counterproductive to this diplomatic effort.

Craig Singleton from the Foundation for Defense of Democracies emphasizes that the White House aims to retain leverage without escalating friction unnecessarily. Trump’s broader strategy appears to isolate adversarial influences in the Western Hemisphere while preserving space for economic cooperation with China.

Beijing’s Stakes Extend Beyond Oil

China’s investment footprint in Venezuela is not limited to petroleum. Over the past two decades, Chinese firms have also built infrastructure projects such as railways, ports, and telecommunications. These ventures part of broader strategic partnerships are now vulnerable to collapse if the U.S.-backed transitional government chooses to review or cancel contracts signed during the Maduro era.

Historical precedent casts a long shadow. The downfall of Libya’s Muammar Gaddafi saw billions in Chinese investments evaporate overnight. A similar scenario looms in Caracas, and Chinese academics like Cui Shoujun have already expressed concern that Maduro’s deals could be declared illegal under the new regime.

Beijing’s Diplomatic Response and Limitations

In response to Maduro’s capture, China issued a strongly worded condemnation, calling the U.S. actions a violation of Venezuelan sovereignty and international norms. Beijing demanded the release of Maduro and reiterated its commitment to continuing economic ties with Venezuela regardless of the political transition.

Nonetheless, China’s influence in the Western Hemisphere remains limited. While Venezuela is the only Latin American country to share a top-tier strategic partnership with Beijing, China lacks the capability to safeguard its interests when faced with direct U.S. intervention. As Singleton noted, diplomatic protests alone offer little protection when Washington acts unilaterally.

The evolving situation reveals a web of intertwined interests: U.S. ambition to reassert influence in Latin America, China’s sunk costs and exposure, and Venezuela’s uncertain political future. Whether Trump can manage Beijing’s economic entanglements without derailing the fragile trade détente remains to be seen. What is certain is that Venezuela has once again become a litmus test for great-power competition and oil remains the currency of power.

Source: Bloomberg

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Economic

From Bold Rhetoric to Real Policy: U.S. Accelerates Greenland Push

President Donald Trump’s long-standing interest in Greenland has rapidly transitioned from geopolitical posturing to actionable steps. Recent disclosures confirm the White House is engaging with mining company Amaroq over investments in gold, gallium, and critical minerals in Greenland. These developments are taking place just days ahead of a key diplomatic meeting between U.S. Secretary of State Marco Rubio and Danish and Greenlandic officials, where the topic of a potential U.S. acquisition will be formally raised.

The investment talks are being framed as a business initiative a positioning that Greenland’s political leadership has tentatively welcomed, albeit with sharp boundaries. Greenlandic MP Aaja Chemnitz emphasized that while the island is “open for business,” it is not for sale. This distinction points to growing friction between economic collaboration and sovereignty concerns, a line that the U.S. may be testing.

A Hypothetical Price Tag and Rising Diplomatic Stakes

A U.S. think tank has estimated Greenland’s hypothetical value at nearly $2.8 trillion, though such figures remain speculative and provocative. More than valuation, the real challenge lies in navigating the legal, political, and cultural barriers to any takeover scenario. Greenlanders continue to push for greater autonomy from Denmark, and any U.S. move perceived as undermining that ambition would likely trigger domestic backlash and international condemnation.

Rubio’s upcoming meeting with Denmark’s Foreign Minister Lokke Rasmussen and Greenland’s Foreign Minister Vivian Motzfeldt will have to address not only mineral rights and defense interests, but also the optics of sovereignty, indigenous rights, and European solidarity.

Global Reaction: Strategic Tensions on the Rise

The geopolitical reverberations are already being felt. Russia, though officially silent, may see an opportunity to exploit divisions within NATO. Meanwhile, China is paying close attention to the Arctic maneuvering. Beijing previously declared itself a “near-Arctic state” in 2018 and has shown long-term interest in Greenland’s mineral wealth and strategic location. Any increased U.S. footprint in the Arctic could provoke countermeasures from both powers, potentially expanding competition in one of the world’s last untapped frontiers.

In a related development, the U.S. Senate passed a War Powers Resolution to block further unilateral military strikes on Venezuela, another area where Trump has sought aggressive foreign intervention. The vote signals growing congressional resistance to expansive executive authority in foreign affairs and could complicate the administration’s ability to enforce or militarize its Arctic ambitions without legislative backing.

Market Implications and Defense Rally

Markets responded to the strategic shift. Defense stocks rallied globally following Trump’s proposal for a $1.5 trillion military budget, as investors bet on expanded government contracts in areas ranging from aerospace to Arctic infrastructure. However, the Nasdaq dipped as investors rotated out of tech, while the Dow Jones rose modestly and the Stoxx 600 in Europe edged lower, reflecting caution amid geopolitical uncertainty.

Adding another layer of complexity, the U.S. Supreme Court is set to rule on the legality of Trump's tariff strategy, particularly whether emergency powers under the International Emergency Economic Powers Act (IEEPA) were misused. If deemed illegal, the U.S. government could be required to refund up to $150 billion in paid duties an outcome that would reshape not just trade law but the fiscal balance Trump is relying on for his expansive military and foreign policy plans, including those related to Greenland.

Trump’s Greenland initiative has now entered a pivotal stage, with real investments, strategic negotiations, and international scrutiny converging. While the rhetoric of purchase may remain largely symbolic, the U.S.’s growing Arctic involvement is real and could signal a long-term geopolitical rebalancing in the High North. Whether this leads to greater cooperation, confrontation, or a new Cold War frontier remains to be seen, but the stakes have never been higher.

Source: CNBC

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Michael Ross

Remarks of Officials

Political

In the wake of the US capture of Venezuela's leader, China is intensifying its campaign to promote its governance model as a superior alternative to Western capitalism, framing it as a new blueprint for developing nations.

An article in the People's Daily by Liu Haixing, who heads the Communist Party's International Department, laid out the case for why China’s political system and development path offer fresh solutions for the world. The department is responsible for the party's outreach to foreign political organizations.

China's Case Against Western Capitalism

Liu pointed to what he described as "frequent systemic crises within capitalism" to argue that the success of the Chinese model has boosted the global appeal of socialism.

"The historical evolution and the competition between the two ideologies and social systems—socialism and capitalism—are undergoing a major shift on a global scale that increasingly favors socialism," he wrote.

According to Liu, China’s rise has dismantled the "Western-centric" notion that modernization is synonymous with Westernization. He positioned the Chinese approach as a new standard for other countries.

"It sets a benchmark and provides a brand-new alternative for developing nations seeking to achieve modernization while maintaining their independence and autonomy," he stated.

Liu highlighted several advantages of the Chinese system over Western democracies, including:

• Strong party leadership and discipline

• Long-term economic planning

China is expected to release its 15th five-year plan during its annual political gathering in March.

Beijing Positions Itself as a Global Stabilizer

Without naming the United States directly, Liu criticized the world's leading superpower while presenting China as a source of global stability.

"Particularly in an era of intensifying geopolitical conflicts and the rise of protectionism and unilateralism, China remains steadfast as a force for peace, stability, and progress in the world," he wrote. He added that China continues to inject "certainty into a world defined by turbulence and transformation."

This messaging aligns with Beijing’s official response after Donald Trump announced the capture of Venezuelan leader Nicolas Maduro. China’s Foreign Ministry condemned the attack, while President Xi Jinping, in his first international appearance after the event, described China as a "peace-loving, open-minded, inclusive" nation.

US-Venezuela Tensions Fuel Ideological Divide

Since Maduro's capture, the Trump administration has emphasized the "Donroe Doctrine," a strategy aimed at asserting US dominance in the Americas and countering rivals in the Western Hemisphere. This campaign directly challenges China's significant economic investments and growing presence in the region.

In a Wednesday interview with the New York Times, Trump described a vision of American power limited only by his "own morality." He suggested that past presidents were too hesitant to use US power to achieve political supremacy or national gain.

"I don't need international law," he said. "I'm not looking to hurt people."

Beijing has long argued that the current global order is unfairly dominated by the United States and its allies. It continues to advocate for an alternative system where developing countries, with China at the forefront, can assume a more prominent role.

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Economic

Consumer Inflation Rebounds, But Annual CPI Misses Target

China’s headline consumer price index (CPI) rose 0.8% in December compared to a year earlier the fastest monthly pace in nearly three years driven mainly by a surge in fresh vegetable prices, which spiked 18.2% due to winter-related supply constraints. On a month-over-month basis, prices edged up 0.2%, exceeding expectations of a 0.1% rise.

However, this rebound failed to lift annual inflation meaningfully. For the full year 2025, CPI was essentially flat, falling well short of Beijing’s target of “around 2%,” signaling that stimulus measures, such as the consumer goods trade-in program, have not had a strong effect on overall demand.

Core inflation, which excludes volatile food and energy prices, remained unchanged at 1.2% in December, indicating underlying consumer demand remains subdued despite short-term seasonal factors influencing headline numbers.

Factory-Gate Deflation Extends Record Stretch

While consumer prices showed a modest pick-up, producer price index (PPI) data reflected the continued stress in industrial sectors. Factory-gate prices dropped 1.9% year-on-year in December a slightly softer fall than November’s 2.2% marking more than three years of consecutive monthly declines.

Sectors such as durable consumer goods and automotives remain under pricing pressure. Durable goods prices fell 3.5% year-on-year, while gasoline-powered and new energy vehicle prices dropped by 2.4% and 2.2%, respectively. The ongoing deflation in PPI underscores structural overcapacity and intense competition, particularly in manufacturing and electric vehicles, where firms have reintroduced price cuts amid tepid demand.

Causal Factors Behind Diverging Inflation Trends

The divergence between modest consumer inflation and deepening producer price deflation suggests a complex dynamic: short-term food-related price increases are not reflective of broader economic strength. Instead, a weak labor market, fragile household confidence, and a protracted real estate downturn are acting as demand suppressors. These factors are causally linked to China’s inability to generate self-sustaining inflation, despite repeated pledges and interventions by policymakers.

Moreover, the persistence of producer deflation highlights chronic oversupply and margin compression across key industrial sectors. This condition correlates with falling industrial profits, which declined 13.1% in November the steepest drop in over a year.

Property Sector Weighs on Recovery Outlook

Beijing continues to grapple with the fallout from the real estate sector’s long slide. Despite repeated commitments to stabilize the sector reiterated in the December economic work conference housing sales and investment remain weak. A recent editorial in Qiushi Journal, the Communist Party’s ideological publication, called for comprehensive, rather than piecemeal, stabilization policies.

Nevertheless, analysts like Macquarie’s Larry Hu warn that anticipated policy easing such as further mortgage rate cuts and relaxation of purchase restrictions may not be sufficient to reverse the downward trajectory. He forecasts a 7% decline in new home sales by floor area in 2026, following an 8% fall in 2025.

Growth Momentum Likely to Weaken in Q4

China may still meet its full-year GDP growth target of around 5% in 2025, but momentum appears to be slowing. Bank of America Global Research expects Q4 growth to moderate to 4.5%, down from 4.8% in Q3. Fixed-asset investment likely contracted more deeply in December, and while industrial production may show a modest year-end lift, it is unlikely to compensate for weakness in real estate and consumer sectors.

Although the official PMI index in December rose above the expansion threshold to 50.1, snapping eight straight months of contraction, this appears more seasonal than structural. Without stronger consumption and investment cycles, the recovery remains fragile and uneven.

December’s inflation data offers mixed signals: a short-term lift in CPI driven by food prices masks deeper deflationary currents in the industrial and property sectors. While headline figures show temporary relief, the underlying trends point to persistent weakness in domestic demand and private investment. Policymakers face mounting pressure to deliver more forceful and targeted stimulus in 2026, or risk slipping into a prolonged low-growth, low-inflation environment.