Abstract: The current plight of China’s photovoltaic industry is not due to the industry life cycle movement, but to the significant excessive production capacity in the stage in terms of the related demand. The substantial cause for the overcapacity lies in the improper interference with industrial investment from the local government land use and the system defects in financial and environmental protection industries, which results in a “tide phenomenon” in the investment of photovoltaic industry. Energy security and environmental protection should be the strategic value of the basic motivation to support the PV industry in China. The so-called “PV New Policy” which is based on the inherent logic of “market failure” lacks of solid theoretical basis, it is impossible to produce desirable results. This paper suggests that, firstly, specific, reasonable and workable implementation rules should be worked out immediately to stimulate the domestic market demand for photovoltaic products, so as to cultivate the domestic PV market; secondly, the deep-lying system defects formed by excessive production capacity should be reformed, so as to prevent and deal with from the source the problem of excessive production capacity frequently appearing in China’s industrial economic development; finally, the government’s economic regulation on the industry should be strictly limited to the fields in which natural monopoly and asymmetric information exist, so as to avoid generalization of regulation and borderless expansion of government regulation power.

Key words: photovoltaic industry; overcapacity; tide phenomenon; system defect