A worker assembles a solar power panel for Eoplly New Energy Technology Co Ltd in Hai'an county, Jiangsu province.[Photo/China Daily]

Many Chinese photovoltaic (PV) enterprises are trying to expand their businesses overseas due to the overcapacity in the upstream PV manufacturing industry and a decline in domestic demand for PV products.

In 2011, China saw a serious oversupply of PV modules, accounting for 80 percent of the world's total output. The gross profit margin of the PV manufacturing sector has spiraled down to a mere 5 percent, yet the profit margin of the downstream industry-the operating of photovoltaic stations- has been on the rise.

"The investment cost of PV plants has dropped a massive 60 percent over the past one and a half years," said Wang Xuejun, president of BaySolar AG. Chinese PV enterprises are seeking to build PV stations because of the current overcapacity in the upstream PV manufacturing industry and the increasing returns on PV stations, said Wang. Running PV plants has become a way for those firms to hedge assets.

BaySolar AG has benefited from its overseas expansion, with its average annual growth rates in both revenue and assets exceeding 100 percent. In addition, many other private PV companies have also recently revealed their intentions to construct overseas PV plants.

Chaori Solar has agreed to team up with S4 Clean Energy Projectos Esolucoes Sustentaveis Ltd. in order to develop a 272MW solar capacity plant in Brazil. Both parties also plan to set up a joint venture for the operation of PV stations.

Hareon Solar Technology recently announced that the company was set to invest in two companies running PV plant businesses across the U.S. and Australia.

Hareon Solar Technology has also gained permission to build a 122MW solar-panel power station in Romania.

The National Development and Reform Commission, China's top economic planner, announced the approval of 15 overseas projects in October of this year. Solar energy programs are among those major international economic projects that have been given the go-ahead in a major effort to boost the country's global presence within the solar sector.

Apart from private PV companies, a number of state-owned enterprises are also looking for opportunities to develop PV stations in foreign countries. China General Technology (Group) Holding Ltd. has decided to invest in two overseas PV projects and it is currently designing construction plans.

It remains needless to say that these solar companies are also facing challenges. Policy risk is one of their number one concerns. Many countries have launched probes against China's PV products and the process of overseas expansion is likely to be impeded by local governments, said Shen Hongwen, an industrial analyst on new energy with CIConsulting, an industry research and consulting firm.

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