China to overhaul struggling solar panel industry

The announcement, which analysts have expected for months, comes as Beijing faces trade sanctions by the United States and possibly Europe over complaints its support for solar panel producers violates trade rules.

Beijing will encourage mergers, reduce government support for the industry and block local leaders from supporting domestic producers, said a Cabinet statement late Wednesday. It said some producers might be allowed to go bankrupt.

The statement gave no details but it affirmed that the communist government sees solar power as one of a series of "strategic emerging industries" that it wants to develop.

Beijing encouraged the industry's expansion over the past decade with grants and low-cost loans. That prompted hundreds of small producers to spring up, flooding the market with supplies and depressing prices.

U.S.-traded shares of major Chinese solar panel manufacturers rose on the news. Suntech Power Holdings Ltd. gained 17.8 percent, Trina Solar Ltd. added 9.3 percent and Yingli Green Energy Ltd. rose 7.1 percent.

Chinese solar manufacturers have reported hundreds of millions of dollars in losses this year due to lower prices and slower sales following the 2008 global financial crisis.