Chinese manufacturers of photovoltaic solar (solar PV) equipment have reportedly asked some of their Taiwan-based suppliers of solar cells to sell products on open account terms with credit facilities.

Taiwanese manufacturers usually sell to Chinese buyers on letter of credit (L/C) terms and may feel too exposed to credit risks if they sell on open account terms.

Significant profits

The suppliers in Taiwan are considering whether to accept the requests from their Chinese customers according to industry sources.

China's solar PV manufacturers made significant profits in 2014 and expect to remain profitable in 2015 as the Chinese government has set ambitious targets for new solar installations across China.

Supplier benefits

New installations include rooftop solar PV systems on commercial and residential buildings and larger scale power generation facilities.

The Chinese manufacturers are telling their Taiwanese suppliers that they will benefit from the proposed new arrangement.

They say that if open account terms were adopted, this would provide the Chinese manufacturers with more working capital, thereby enabling them to write more business and buy more Taiwanese solar cells.

Taiwanese concerns

But the Taiwanese suppliers are reportedly concerned that even multinationals operating in China insist on payment on cash or L/C terms with Chinese solar PV manufacturers.

Taiwan's solar cell manufacturers have also reported losses recently and the demands from Chinese customers may expose them to unacceptable credit risks.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.