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( Source of the document: ICC Digital Library )
Letters of credit are being made widely available to Chinese companies making solar energy. The L/C availability is inspired by the Chinese government's efforts to stimulate commercial activity across all industries, but there are concerns that the move could backfire later this year.
The Chinese government introduced a 4 trillion renminbi stimulus plan in November 2008 and ordered banks to make credit more available. Executives of solar module and cell maker Solarfun Power Holdings Co. (SOLF) say banks are approaching the company offering it new L/Cs. "It's very easy to get money from local banks," Solarfun's chief financial officer, Amy Liu, told local media. "But I don't think the situation is sustainable," she added, explaining that later this year the central government may need to tighten credit conditions, banks will once more make credit hard to obtain and companies will again be scrambling for credit.