The crisis for China's photovoltaic industry continues with the eurozone debt crisis.

Excessive production capacity means this is a large-scale crisis for the whole industry, rather than just a problem of individual companies. Trade protectionism moves by the United States made the situation worse.

The industry was earmarked by China as a promising and emerging one with strategic importance for the transformation of the national economy. It developed so fast with the governments' support that its production capacity easily outweighed domestic demand, even as many local governments blindly promoted the industry in their regions. If the foreign market weakens, disaster for the whole industry is almost unavoidable.

Chinese decision-makers should draw lessons from this situation. Local governments lack coordination with each other to develop certain industries. And even a new-energy industry with a bright future can become the target of trade conflicts or protectionism.

Most Chinese photovoltaic companies do not pay much attention to research and development. They are actually replicating the old Made-in-China practices in a new industry. So they can only compete with lower prices, not with more advanced technology and innovation. That's why they are easily deemed as targets by developed countries.

To overcome the difficulties, the Chinese government should do more in the framework of the WTO to help Chinese companies defend their legal interests. On the other hand, the Chinese central authority should coordinate with local governments to adjust its plans and objectives for the development of the industry to fit changing international markets, before domestic demand grows.

Companies should increase their input in R&D and make innovation their most competitive strength. They must gain more experience and understanding of the international market and the target countries' national conditions as fast as possible to adjust their production and marketing strategies accordingly.

Translated by Li Yang from 21st Century Business Herald