The country's biggest solar-panel makers are suffering huge losses because panel prices have fallen by three-fourths since 2008, The New York Times reported Friday.
The losses could affect state-owned banks that financed factories, with approximately $18 billion in low-rate loans, and municipal and provincial governments that provided loan guarantees, the Times said.
People involved in China's renewable energy strategy say it may be necessary to accept the closing of many businesses in the solar-power sector so the most efficient companies might be saved financially.
"If one-third of them survive, that's good, and two-thirds of them die, but we don't know how that happens," said Li Junfeng of the National Development and Reform Commission, China's top economic planning agency.
Li argues banks should cut off loans to all but the strongest solar-panel companies and let the rest go bankrupt.
Some others say they share the same view.
"For the leading companies in the sector, if they're not careful, the whole sector will disappear," said Chen Huiqing, the deputy director for solar products at the China Chamber of Commerce for Import and Export of Machinery and Electronic Products.