Suntech Power Holdings , which was until recently the world 's largest producer of solar panels , has said its main subsidiary in China is bankrupt , in a further stark illustration of the declining fortunes of the global solar industry . Suntech 's Wuxi subsidiary is the first big Chinese solar group to declare insolvency and the world 's biggest such bankruptcy , following a string of failed western solar companies including Q-Cells in Germany and Solyndra in the US . `` What the Suntech case shows us is that the Chinese companies are not too big to fail , '' said Jenny Chase , head of solar analysis at Bloomberg New Energy Finance . `` We are entering a period of great difficulty for Chinese solar manufacturers . '' China is the world 's biggest producer of solar panels , but the sector is suffering from overcapacity after rapid expansion fuelled by cheap loans and preferential government policies . US-listed Suntech was the posterchild of the country 's swift entry into , and then dominance of , the market . It announced on Wednesday that eight Chinese banks had filed a petition for insolvency and restructuring of Wuxi Suntech in a court in Jiangsu province . The bankruptcy is a milestone because , until now , China 's larger struggling solar companies have been kept afloat by cheap credit and indirect state support . Suntech defaulted last week on a $ 541m convertible bond issued by its Cayman Islands subsidiary , which triggered cross-defaults on other loans outstanding . According to the company 's most recent reports , Suntech 's net debt stood at $ 1.6bn at the end of March 2012 . The case is set to be a big test of China 's new bankruptcy law , which came into effect in 2007 but has rarely been applied to overseas-listed companies with assets in China . It will be complicated by the fact that neither the US-listed entity , Suntech Power Holdings , nor any subsidiaries other than Wuxi are declaring insolvency . `` It 's going to be a test of what , exactly , do the US entities and the Cayman entities really own ? '' said one Singapore-based analyst who asked not to be named . Under Chinese law , the courts will have six months to come up with a restructuring plan that is then presented to creditors , with the possibility of an additional three-month extension . Bankruptcy specialist Han Chuanhua , a partner at the Zhongzi Law Office in Beijing , said : `` It is rare for such a big company to get into bankruptcy proceedings , even though many companies can not pay off their debts . '' He cited local government bailouts , and creditor reluctance , as two main reasons why insolvent Chinese companies avoid bankruptcy . The government of Wuxi , the city where Suntech is headquartered , has come to Suntech 's aid in the past -- and appears to be taking an even more active role in the company with the appointment earlier this week of a new president , Zhou Weiping , who previously worked for the government-backed Wuxi Guolian Development Co. Mr Han said the co-ordinated action of the eight banks suggested the local government had given its blessing to the proceedings . `` Without government support , even if creditors file a petition , the court would n't accept it , '' he explained . David King , Suntech 's chief executive , said : `` While we evaluate restructuring initiatives and strategic alternatives , we are committed to continuing to provide high-quality solar products to our global customer base . ''
Suntech Solar Holdings has announced its main business in China is bankrupt . Until recently Suntech was the world 's largest manufacturer of solar panels . Stark illustration of the changing fortunes of the global solar industry .