In January 2026, China’s market regulator summoned the country’s six biggest polysilicon producers to Beijing. Polysilicon—the refined silicon from which solar cells are made—is an increasingly important resource for global manufacturing and essential for the green transition. Around 2012, China emerged as the world’s largest producer, and by the late 2010s it had managed to establish itself in a dominant position in the industry, with over 80 per cent of global output. Yet, such was the country’s dominance that by 2025 the industry had become the poster child for what Chinese officials had begun to call “involution”, the unstable mixture of cutthroat competition amid crippling overcapacity in production. China’s producers had roughly 3.2 million tonnes of annual polysilicon production capacity; domestic demand justified running less than half of that. With every tonne they produced, polysilicon manufacturers were losing money.
The Chinese state’s answer, developed last year, was to create a consolidation platform: a jointly held company that would buy out weaker firms, mothball as much as a third of national capacity and coordinate output among the survivors until prices could recover. An executive at GCL, one of the fund’s leading participants, candidly described the plan as an OPEC for the polysilicon industry. By December 2025, when the vehicle was registered in Beijing, polysilicon spot prices had climbed by 50 per cent from their summer lows.
Where the industry saw hope, however, the State Administration for Market Regulation (SAMR)—the state agency charged with trust-busting—saw collusion. At the January meeting in Beijing, SAMR ordered the companies to stop coordinating production, sales and prices, stop allocating output and market share among themselves and submit rectification plans within two weeks. When word reached the market two days later, polysilicon futures fell as far in a single session as exchange rules allow.
In this way, two arms of the same state were set against one another. For more than a year bodies in Beijing, including the Central Commission for Financial and Economic Affairs, the National Development and Reform Commission and the Ministry of Industry and Information Technology, had been campaigning against exactly the kind of destructive competition from which the producers were now trying to escape. Yet here were producers offering to end exactly that—until another arm of the state intervened. The message the state was sending was clear: no matter how urgent the problem of involution, firms would not be permitted to resolve it via private pricing cartels. The producers’ efforts to coordinate output cuts would have restored pricing power to an industry whose margins had collapsed, but allowing producers to regain control over prices ran counter to the logic of a system that has long prioritized abundant, low-cost industrial inputs. If the excess capacity were to be shuttered, it was now clear, it would be on the state’s terms, through energy-efficiency standards and tightened credit, and it would happen on the state’s schedule. The polysilicon producers would have to keep producing without profits for a while longer.
The machine
If the energy transition looks at first blush like a technology problem, then that scene in Beijing shows that more than anything else it is a problem of political economy. Producer profitability comes at the expense of consumer affordability. At present, clean tech solutions are expensive, so to keep the products cheap enough that the world actually buys them somebody must carry producers through their initial losses. And it must keep doing so, at scale, for decades. What China has built—partly by design, partly by the accident of its own institutions—is the one system in which this can happen, where capital cannot easily walk away and where the state backstops the losses.
Though it may not have been created with this goal in mind, what has been created is a machine for subordinating producers’ returns to other aims. By describing it as a machine we do not mean to suggest that it is a single system controlled entirely from its head; it is not the Chinese state acting as a single conscious planner. Some outcomes are the result of deliberate policy, while others emerge from the complex interactions of local governments, state-owned enterprises, private firms, banks and regulators, all responding to the incentives Beijing created. It is more like a set of institutions, incentives and constraints that consistently push actors toward certain politically prioritized outcomes and away from others.
Whatever else the machine is, however, it is certainly not gentle, nor is it well calibrated: the affordability of China’s solar panels, electric vehicles (EVs) and other clean tech has strangled producers elsewhere, while its domestic producers are strained to breaking point and Beijing fights a price war of its own making. But the Chinese machine exists: no other economy runs anything like it, and perhaps none can. What’s more, the energy transition now depends on it.
Is this machine a model, or a warning? Over recent months we’ve put this question to people who know the terrain: specialists in Chinese industrial policy, energy analysts and economists, historians of the transition and, in some cases, vocal critics of how Beijing pursues its environmental goals. Their answers run through everything that follows, and they complicated our assumptions at least as often as they confirmed them. This essay is not a primer on the Chinese way of doing things, nor is it a case against markets. Instead, it asks whether any political-economic arrangement now operating—Beijing’s included—can supply what the next quarter century of decarbonization demands, at the pace the physics requires.