China Solar: 2H26: Sequential improvement while valuations are at trough; u/g XYS, Flat to OW and LONGi, SZ SC to N

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China Solar: 2H26: Sequential improvement while valuations are at trough; u/g XYS, Flat to OW and LONGi, SZ SC to N

driven by (i) a high base in 2025, (ii) rising 60%

curtailment from grid dispatch constraints, and (iii) lower tariffs / uncertainty 50%40%

in project returns linked to “Doc 136”. We expect 2H26 installations and 30%

module production to improve vs. 1H26 on seasonality. We think the demand/ 20%10%

supply outlook for solar glass will improve in 2H vs 1H, alongside production 0%

suspension, evidenced by a decline in July industry inventory days. 1H as % of China'sadditionsfull year solar 2H as % of China'sadditionsfull year solar

• While anti-involution has disappointed in timing, there are green shoots: Source:2025 whereBloombergNEF,there was a policyNEA, J.P.changeMorgan.in May-25,Note: Otherdistortingthan

The solar sector remains pressured as the solar silicon value chain is still loss- the seasonality, China solar installation usually clusters in the

2H.

making and the anti-involution initiative disappointed in 1H. However,

regulatory efforts have increased since July 2026: (1) China released three

mandatory national standards on July 2, spanning the solar value chain,

intended to curb high-energy/low-efficiency capacity and raise “green access”

thresholds; (2) the CPIA released the “General Principles for PV Industry Cost

Accounting Models”, which aims to align cost calculation practices and

strengthen regulatory oversight; and (3) the SAMR will conduct a price-

compliance guidance session (link) for the PV industry on July 31st, aiming to

implement general principles and curb irrational competition. We think this

should help to prevent further price declines, but may not necessarily be

sufficient for a demand/supply turnaround.