China-based manufacturers of photovoltaic solar (PV solar) equipment are increasingly moving to letter of credit (L/C) terms for sales of goods to India.

While Chinese production of PV solar equipment is ramping up again as the country comes out of coronavirus lockdown, supply chains to India are fragmented and a lockdown in India has been extended to 3 May from 14 April.

The combination of these uncertainties means suppliers are even more likely to insist on L/C terms and those that do not may find themselves vulnerable in such uncertain times.

Production boost

China's PV solar equipment exports increased a substantial 160 per cent to 7.49 gigawatts (GW) in March from 2.83GW in February 2020.

While Chinese manufacturers resumed operations after the lockdown in March, a return to full production capacity is unlikely due to restrictions in place to ward off a second wave of coronavirus in China.

Depressed market

Production is also expected to be depressed by falling demand from key markets still in the midst of lockdown, including the US, Europe and Australia, which may jeopardise the survival of smaller manufacturers.

While most major Chinese manufacturers have moved to L/C terms some smaller manufacturers are reportedly still operating on an open account basis and these firms may be more vulnerable to market uncertainties than their larger counterparts.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.