Investment Rating - The industry view is rated as Attractive, particularly for Chinese solar stocks, especially polysilicon players such as Tongwei, Daqo, GCL Poly, and Xinte, which saw share price increases of 28-36% from June 30 to July 8, compared to HSI +0.3% and SSE Composite +1.5% [2][6]. Core Insights - The central government has increased its focus on disorderly competition within the solar industry, indicating a shift in regulatory attention [2][6]. - There are execution risks due to weak demand, dominance of private firms in the market, and resistance from local governments [2][6]. - The report highlights potential uncertainties in the implementation of supply-side reforms, despite the government's heightened focus on the industry [2][6]. Summary by Sections Market Dynamics - The solar module industry is experiencing involution-style competition, as noted by People's Daily [6]. - The Central Financial Commission has taken steps to curb unregulated low-price competition, with PV being one of the highlighted industries [6]. - A forum chaired by the MIIT Minister with top PV firms and the China PV Industry Association occurred on July 3, indicating ongoing discussions about industry challenges [6]. Demand and Supply - PV demand is expected to decline in the second half of 2025 due to a policy node in May, with 198GW of solar capacity added in the first five months of 2025 [6][11]. - The solar manufacturing value chain in China is largely dominated by private firms, with significant new capacity built under local government investment promotion from 2022 [6]. - High polysilicon inventory levels exceed 300kt, equivalent to over 100GW or more than four months of demand [6]. Industry Consolidation - GCL and Tongwei have suggested potential consolidation in the polysilicon industry through the formation of a production capacity acquisition fund with other top players [6].