Electronics Retailer Hhgregg Is Going Out of Business
By THE ASSOCIATED PRESS
INDIANAPOLIS — Consumer electronics chain hhgregg Inc. is going out of business and shutting down all its stores.
The Indianapolis company said Friday that it will liquidate its assets after failing to find a buyer for the business. It filed for bankruptcy protection in March.
Founded in 1955, the retailer had 220 stores in 19 states selling major appliances like washers and TVs, as well as computers and home theater systems. As of May last year, it had about 5,000 employees.
Just days before announcing its bankruptcy protection filing last month, hhgregg said it planned to trim down by closing three distribution centers and 88 stores. But the move was not enough to salvage the chain.
“While we had discussions with more than 50 private equity firms, strategic buyers, and other investors, unfortunately, we were unsuccessful in our plan to secure a viable buyer of the business on a going-concern basis within the expedited timeline set by our creditors,” said CEO Bob Riesbeck.
The company said it will start the sale of the merchandise, furniture, fixtures and equipment at its stores and distribution centers on Saturday.
It is the latest brick-and-mortar chain to buckle under due to industry changes from the rise of online shopping. Amazon.com has eaten away at sales of almost every traditional retailer. Earlier this week, shoe chain Payless ShoeSource filed for bankruptcy protection.
Richmond Fed President Resigns, Admitting He Violated Confidentiality
By BINYAMIN APPELBAUM
WASHINGTON — Jeffrey M. Lacker, the president of the Federal Reserve Bank of Richmond in Virginia, resigned abruptly on Tuesday, saying that he had broken the Fed’s rules in 2012 by speaking with a financial analyst about confidential deliberations.
Mr. Lacker said he also failed to disclose the details of the conversation even when he was questioned directly in an internal investigation.
The confession and resignation shed light on a nearly five-year-old mystery. In October 2012, Medley Global Advisors, a firm that tracks policy developments for financial investors, sent a note to its clients describing previously undisclosed details of the Fed’s plans for a new phase in its bond-buying campaign.
The information was potentially valuable to investors, who could have made money by anticipating the market’s reaction when the Fed’s plans were publicly disclosed.
The Fed conducted an inconclusive investigation into the source of the leak. The Commodity Futures Trading Commission opened an insider trading investigation and referred the matter to the United States attorney’s office in Manhattan, which then began a criminal investigation, two people briefed on the matter said.
But the investigation stalled in the past couple of years, one of the people said. As the various government authorities sought to resolve the matter, negotiations heated up about six weeks ago. The statute of limitations on the case was due to expire in the fall.
Mr. Lacker decided to announce his resignation after being told by the authorities that they had completed their investigation into his role, a lawyer representing him said.
“Dr. Lacker has cooperated with the Department of Justice and has been informed that no charges will be brought and that the investigation as to him is complete,” said the lawyer, Richard Cullen, a partner at McGuireWoods. (Mr. Lacker has a doctorate in economics from the University of Wisconsin.)
The Fed’s Office of the Inspector General said Tuesday that its investigation also was now complete. It is not clear whether any other investigations are in progress.
The episode occurred after the Fed said in September 2012 that it would begin to accumulate mortgage bonds until job growth improved substantially, a new chapter in its campaign to stimulate economic growth in the aftermath of the 2008 financial crisis.
On Oct. 3, a day before the Fed released an account of its deliberations, Regina Schleiger, a Medley analyst, sent a note to clients saying the Fed was likely to announce in December that it would buy Treasuries too. The note also said that Fed officials were considering a statement that the central bank would not raise interest rates before the unemployment rate fell below a threshold of 6.5 percent.
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The information was accurate and valuable. On the day Ms. Schleiger published her memo, the yield on the benchmark 10-year Treasury was 1.61 percent. After the Fed’s official account was published the next day, the benchmark yield rose to 1.74 percent on the day. Investors who saw the memo — titled “Fed: December Bound” — could have profited by anticipating that movement.
Mr. Lacker said Tuesday in his statement — issued by McGuireWoods rather than the Richmond Fed — that he had not provided any confidential information about the Fed’s deliberations to Ms. Schleiger, whom he did not name.
Instead, he said that Ms. Schleiger mentioned the information and that he had failed to make clear that he could not comment. The next day, after seeing Ms. Schleiger’s memo, Mr. Lacker said, “I realized that my failure to decline comment on the information could have been taken by the analyst, in the context of the conversation, as an acknowledgment or confirmation of the information.”
He added, “I deeply regret the role I may have played.”
After the leak, the C.F.T.C. pursued an investigation under its “Eddie Murphy rule.” This rule was a nod to Mr. Murphy’s 1983 movie “Trading Places,” which humorously exposed the legality of insider trading in commodities.
In 2010, the Dodd-Frank Act adopted some restrictions on federal employees intentionally providing nonpublic government information to help other people trade in certain markets.
Yet the investigation stalled as the agency and Manhattan federal prosecutors were unable to serve a subpoena on Medley because it considers itself to be a news organization, the people briefed on the matter said. The Justice Department generally avoids issuing subpoenas to news organizations.
Separate from the insider trading rules, the Fed had announced a new policy in 2011 restricting contact between policy makers and market intelligence firms like Medley, which traded on the perception that analysts had access to inside information. Officials were instructed to avoid conversations that might contribute to such impressions.
Mr. Lacker said Tuesday that in speaking with Ms. Schleiger he may have violated this policy, too, regardless of the contents of the conversation. He acknowledged speaking with her multiple times.
Mr. Lacker, 61, was the longest-serving member of the Fed’s policy-making committee. He became president of the Richmond Fed in August 2004. He had previously announced that he planned to resign in October.
The Richmond Fed said it would continue to search for a new president, and that its first vice president, Mark L. Mullinix, would lead the bank in the interim. Mr. Lacker was not a voting member of the Fed’s policy committee this year.
The Fed has sought to limit leaks in recent years both by sharing more information with the public and by tightening its communications policies.
In a statement, the Fed said, “We appreciate the diligent efforts made to bring this matter to its conclusion.”
Correction: April 5, 2017
An earlier version of a picture caption with this article misstated the year that a photograph of Jeffrey M. Lacker was taken. It was 2013, not 2012.
NRG, a Power Company Leaning Green, Faces Activist Challenge
By DIANE CARDWELL and ALEXANDRA STEVENSON
Over the years, NRG, a leading independent power producer whose fleet once depended heavily on coal, has made big bets on low-carbon energy technologies and publicized its embrace of sustainability as essential to its future.
It pursued developing renewable energy for customers large and small and set aggressive goals to reduce its emissions of carbon dioxide — 50 percent by 2030, and 90 percent by 2050.
But now, the company finds its strategy challenged from within.
Activist hedge-fund investors, intent on extracting value from NRG assets, have installed two directors on the board who, in one potential approach, would push to sell off some of the company’s renewable-power projects, raising questions about how it would meet its clean-energy goals.
It is but the latest skirmish in NRG’s long struggle to make several kinds of energy products — conventional and renewable, large-scale and decentralized — profitable under one corporate umbrella.
Raising further questions, one of the directors installed by the activists, Barry T. Smitherman, a lawyer and former energy industry regulator from Texas, has publicly questioned accepted climate science and called global warming a hoax. “Don’t be fooled — not everyone believes in global warming,” he said on Twitter from a presentation called “The Myth of Carbon Pollution” at a conference of regulators in 2013.
And that has drawn the attention of New York City’s comptroller, Scott M. Stringer, who oversees the city’s pension funds that are shareholders in NRG. On Friday, he filed a letter with the Securities and Exchange Commission urging shareholders to oust Mr. Smitherman at their annual meeting on April 27.
“In light of Mr. Smitherman’s stated views on climate change, which are incompatible with NRG’s disclosed business strategy and risks, we question his ability to act in the best interests of NRG and its shareholders,” Mr. Stringer wrote in the letter. “Additionally, we believe his role on the board sends a demoralizing message to the many NRG employees responsible for implementing the company’s existing business strategy and managing its risks.”
Mr. Smitherman did not return an email or phone call seeking comment about his views and how the board shake-up might affect NRG’s long-term strategies and goals.
The conflict has its roots in efforts led by Elliott Management, a multibillion-dollar hedge fund run by Paul E. Singer, and Bluescape Energy Partners, run by C. John Wilder, a former executive at the Texas utility TXU who has been credited with its turnaround.
Under Mr. Singer, an early titan of the hedge-fund industry who has also made a name for himself as a top Republican donor, Elliott has been known for its no-holds-barred approach to taking on companies and governments over its investments around the world.
As an activist investor, Elliott quietly builds up equity stakes in companies until it has a big enough position to start rattling the cages of a company’s management. In South Korea, Elliott became the first investor to publicly spar with Samsung, a conglomerate run by one of the country’s most powerful corporate dynasties. In Argentina, Elliott was pilloried in the local press as a “vulture” investor for waging a decade-long battle with the government over its defaulted debt.
In its investment in NRG, Elliott has so far remained largely behind the scenes. But in an emailed statement on Thursday, Elliott said that if a buyer in the market were willing to pay a premium for some of NRG’s renewables businesses, “it may be a good decision for NRG and its shareholders to crystallize that value.”
Most of the company’s power plants run on fossil fuels like coal and natural gas, but it has extensive wind and solar farms, including several unfinished projects it bought last year from SunEdison, which had gone bankrupt. Earlier this year, the company reported a loss of $891 million for 2016, largely because of low natural gas prices, down from a $6.4 billion loss the year before.
As for investor concerns about the appointment of Mr. Smitherman, Elliott pointed to the fact that Mr. Smitherman had extensive knowledge of the Texas regulatory landscape. NRG is one of the largest energy suppliers in Texas, and some of its assets in the state could be considered for sale, requiring extensive knowledge of the regulatory hurdles.
“Having someone with Mr. Smitherman’s strong Texas-centric utility regulatory background is crucial to helping NRG navigate this process,” said Michael O’Looney, an Elliott spokesman.
“At NRG, the debate is not over clean versus conventional generation,” Mr. O’Looney said. “The debate is simply over who is the best long-term owner of individual assets and fleets of assets that currently reside inside the broader NRG portfolio.”
Mr. Smitherman and Mr. Wilder are two of three independent board members on a five-member committee formed as part of the agreement with Elliott and Bluescape to make recommendations about cost savings, asset sales and other potential actions, according to Mr. Stringer’s letter. The company’s full board has 13 directors, according to its website.
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Mr. Smitherman, an ally of Rick Perry, the energy secretary and former Texas governor, was chairman of the Texas Public Utility Commission, where he helped usher in the high-voltage transmission lines that spurred the development of a robust wind industry. He then ran the state Railroad Commission, which largely regulates the oil and gas industries.
It was not until around 2013, when he announced his candidacy for state attorney general, that Mr. Smitherman began publicly questioning climate science and global warming, according to energy experts in Texas. He appears to still support the development of renewable energy, writing in The Dallas Morning News in December about how beneficial Texas wind power development had been to the state.
NRG has reeled in recent years as it has sought to transform itself from a conventional-energy giant into a leader in the clean-energy economy.
“NRG is caught between what we consider the next generation of power supply and the status quo,” said Travis Miller, an energy and utilities analyst at Morningstar. “The move toward renewable energy and gas generation is a trend that won’t stop anytime soon so every power generator is trying to develop a strategy where they can benefit from the transition period.”
David Crane, a former chief executive, had tried to do that by transforming the company into the Google of green energy, investing in big renewable-energy projects and buying small start-ups to help capture emerging markets like rooftop solar, electric-vehicle charging and home automation. But the company pulled back from those ambitions as a combination of low oil and gas prices and the threat of rising interest rates led to turbulence in the energy markets and skittishness among renewable-energy investors and the company’s stock tumbled. Despite an elaborate reorganization aimed at cutting costs, reducing debt and better aligning the businesses with investors, Mr. Crane was pushed out in 2015, and replaced by Mauricio Gutierrez, the executive vice president and chief operating officer.
Mr. Gutierrez has continued to pursue the company’s sustainability and carbon reduction efforts, but in a more restrained way, focusing more on large-scale renewable projects and less on the emerging markets.
Marijke Shugrue, an NRG spokeswoman, said: “These are not altruistic, sustainability-only goals. We are firm believers in climate change and that CO2 emissions are a leading factor.”
The company, for instance, recently re-signed the Business Backs Low Carbon pledge organized by Ceres, an advocacy group.
But corporate aims may end up in the hands of directors with a different agenda.
In January, Elliott and Bluescape announced that they had each bought a large stake in NRG and were teaming up to put pressure on the company to make changes to its business. NRG was “deeply undervalued” and could be worth more if its management undertook “operational and financial improvements” as well as “strategic initiatives,” Elliott said at the time in a filing to the Securities and Exchange Commission.
Elliott said that Mr. Wilder and his team had “directly relevant experience in effectuating such improvements,” adding that they were in a dialogue with the board.
By February, NRG announced that it had struck an agreement with Elliott, which owned 6.9 percent of the company’s stock, and Bluescape, which had 2.5 percent, to replace two outgoing directors and appoint Mr. Wilder and Mr. Smitherman.
NRG also agreed to undertake a business review of the different parts of the company, including examining “potential portfolio and/or asset de-consolidations.”
The company’s renewables business is likely to be among the assets spun off. Some analysts have argued that those businesses are undervalued because they are housed within NRG’s legacy business, which involves burning natural gas, coal and oil.
Trump Shouldn’t Focus on Job Growth. The New Numbers Show Why.
Neil Irwin @Neil_Irwin
When the first employment report of the Trump presidency was released a month ago, the administration was quick to point to the strong growth in the number of jobs in the United States in February: 235,000, in that initial estimate.
It was a mistake to emphasize it, and the newest numbers, released Friday, show why.
It’s not just that the economy gained a mere 98,000 jobs in March, or that the Labor Department revised earlier months’ gains down by a combined 38,000 (though that apparent volatility alone is an argument for why government officials should be cautious in promoting any given month’s numbers).
More broadly, the United States economy has arrived at a place where job gains, one of hundreds of data points released as part of the monthly report, are not really the best indicator of how things are going.
When the economy is at risk of falling into a recession or struggling to grow out of one, the change in the jobs numbers really is the best single number to understand the state of the economy. While it has a lot of month-to-month statistical variance, it is a fairly reliable indicator — especially if you average a few months together — of whether the economy is growing, contracting or stagnant.
But there are no signs now that the United States is in recession or close to one. And once the economy is close to full employment, gains in jobs take on lesser importance. A few years ago, when the unemployment rate was at 7 or 8 or 10 percent, the level of job gains was driven by employers’ confidence about the economic outlook.
Now, with the jobless rate at 4.5 percent, the binding constraint is the number of available workers. Over the long run, employers can add jobs only as quickly as there are people to fill them. That is determined by a mix of demographic factors like birthrates and immigration levels, along with choices people make like whether to work, retire or stay home with a child.
It’s true that a more booming economy can tend to pull more people into the work force. As President Trump has often noted, there are indeed millions of people not in the labor force who might be in a more robust economy.
But we don’t know how many of those can be coaxed back to the work force as the economy looks stronger, or at what pace. That being the case, it’s hard to know with any certainty what, in 2017 and beyond, would constitute a good level of job growth and what would be a poor one.
Instead of focusing on job growth numbers, which are poised to decelerate anyway thanks to the economy’s near-full-employment status, it would behoove the Trump administration to focus on job market metrics that shed more light at this stage of the recovery and that speak directly to the president’s goal of getting more people back in the job market.
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There are two particularly obvious ones.
■ Wage growth — more specifically, average hourly earnings for private-sector employees — seems poised to grow, and this would represent true progress for American workers. It rose 0.2 percent in March, a solid reading, and is now up 2.7 percent over the last year. That’s pretty good given that inflation is low, but there’s plenty of room for it to rise further as employers get into bidding wars for talented workers.
In fact, if wage growth were stronger, you would expect it to have the positive effect of pulling people on the bench into the labor force. People who don’t see the value in working for $10 an hour might do so for $15.
■ Then there is the direct measure of how many Americans are working, the employment-to-population ratio. You can refine it to include only those who are between 25 and 54 to filter out students who aren’t working because they are in school and retirees who are on the golf course.
That number showed a bit of progress in March as well — it rose to 78.5 percent from 78.3 percent. But it remains below the 80.3 percent recent high in 2007, and well below the 81.9 percent record high in April 2000.
If the Trump administration sets its foremost goals as improvement in those numbers, wage gains and prime-age employment-to-population ratio, it will be focused on the issues that truly bedevil the United States economy in 2017, and have a considerably better chance of success.
When the Federal Reserve lowered interest rates to close to zero during the financial crisis, it was an extraordinary move. The central bank had hit the limits of conventional monetary policy, leaving the recovery to sputter along with less help than it needed.
Now, with that crisis at last behind us, the Fed has begun raising interest rates, and it may be tempting to view its brush with rock-bottom rates as a once-in-a-lifetime experiment and to assume that we are entering a more normal world.
If only that were true. A new study suggests that near-zero interest rates — accompanied by a lackluster recovery — may become a common occurrence.
That’s troubling for many reasons. If the Fed can’t cut rates as much as required to fight a slowing economy, then recessions will become more common and more painful. It suggests an urgent need to reconsider how we will counter the next bout of bad economic news, preferably before it arrives. If monetary policy won’t be enough, perhaps fiscal policy will be. Certainly, this is no time for complacency.
In a nutshell, the American economy appears to have changed in a way that undermines the effectiveness of monetary policy but not fiscal policy, which may need to be wielded more actively.
All of this is the result of two broad trends. First, inflation is lower than in the past. From 1950 through 2011, it averaged around 3.5 percent. In January 2012, the Federal Reserve committed to a target of 2 percent, and actual inflation levels have been even lower.
Second, the real (inflation-adjusted) interest rate consistent with the economy operating at its full potential has fallen, a trend that the Harvard economist Lawrence H. Summers called “secular stagnation.” Most estimates suggest that this “neutral real interest rate” has dropped from around 2.5 percent to 1 percent, or lower.
Put these pieces together, and a conservative guess is that in “normal times,” the nominal interest rate — the neutral real interest rate plus inflation — has fallen from around 6 percent to 3 percent.
That creates a serious problem for the Fed. Here’s why: Most recessions can be cured by lowering rates by several percentage points. When interest rates were closer to 6 percent, the Fed could lift the economy with plenty of interest-rate leeway.
But when normal interest rates are closer to 3 percent, the Fed can cut rates only a few times, because rates can only go so low — perhaps as low as zero, maybe a tad lower. This means that in even a typical downturn, the Fed may be unable to cut rates as much as it would like.
Even worse, this limit is a far bigger problem when an economic downturn follows closely on the heels of a previous recession. Right now, for instance, the central bank’s main short-term rate, the federal funds rate, is still only three-quarters of a percent to 1 percent, because the Fed wants to continue stimulating the recovery. This leaves the central bank with very little room to respond if the economy falters. Even a minor slowdown now could require a larger rate cut than is feasible, once again leaving policy makers wishing they could do more.
This dynamic can feed on itself. The less ammunition the Fed has to blast the economy out of its malaise, the weaker and slower will be the recovery, making it more likely that the next bad shock will require the Fed to cut rates more than is feasible.
To assess these problems, two senior Federal Reserve economists, Michael T. Kiley and John M. Roberts, ran hundreds of simulations in the Fed’s large-scale macroeconomic model, evaluating how the United States would perform in response to the sorts of shocks that have historically buffeted the economy.
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In one set of simulations that you might call the good old days, they set the normal interest rate at 6 percent, and then let the Fed adjust rates as economic conditions evolved. In that environment, interest rates hit zero only around 2 percent of the time. This accords with the reality that the lower limit on interest rates simply was not a problem until recently.
But times have changed. When the economists set the normal interest rate at 3 percent and let the Fed adjust interest rates as conditions warranted, rates moved down to zero percent and could not move any lower roughly a third of the time. In some of these cases, the economy didn’t need much extra punch, and so this slowed the recovery only a little. In others, it was a more telling constraint, and it took years for the economy to return to normal.
Their research paper, “Monetary Policy in a Low Interest Rate World,” which was presented at a recent meeting of the Brookings Papers on Economic Activity, explains why this is so worrisome.
The problem is that a lower bound on interest rates creates a sharp asymmetry in how the economy works: It’s relatively easy for the Fed to cool an overheating economy by raising rates. But when the economy is already cooling down, the central bank may not be able to cut rates enough to prevent a recession or to spur a strong recovery. Downturns will be deeper and more common than upswings. This means that, on average, output will be lower than it needs to be — perhaps more than a percentage point lower — and inflation will be lower than the Fed’s 2 percent target. Joblessness will be more common, particularly during slumps.
It is crucial, therefore, that macroeconomic policy adjusts to these problems before the next downturn hits.
The Fed has already been experimenting with monetary policy, but it hasn’t been enough. In the wake of the financial crisis, for example, it bought bonds in a program known as quantitative easing, cutting long-term interest rates once short-term rates were near zero. The resulting stimulus was relatively small, reducing long-term rates by only a fraction of a percentage point, and the program was politically unpopular.
The authors suggest an alternative approach in which the Fed makes up for “missing stimulus” by promising to keep rates lower, for longer periods. In their view, the Fed needs to make up for the interest rate cuts that it wishes it could have made, but couldn’t. Promising this in the depths of a downturn would offer businesses reason to be optimistic, they say, boosting the recovery. The Fed would need to keep rates low, even as inflation overshot its target.
It’s a promising approach, but would people really believe the Fed’s promises? I know a lot of central bankers, and I fear they are incapable of sitting still while inflation rises above their stated target.
Perhaps the answer lies outside the Fed. It may be time to revive a more active role for fiscal policy — government spending and taxation — so that the government fills in for the missing stimulus when the Fed can’t cut rates any longer. Given political realities, this may be best achieved by building in stronger automatic stabilizers, mechanisms to increase spending in bad times, without requiring Congressional action.
There’s an opportunity to wed this to President Trump’s desire for more infrastructure spending. Rather than building more roads today as the economy approaches full employment, we should spend more when the economy is weak and the Fed is unable to provide enough stimulus. One way that this could be done is by automatically increasing the Highway Trust Fund when the federal funds rate hits zero and perhaps ramping up spending the longer that rates are stuck there. More roads would be built when they do the most good for the economy.
This idea reverses a decades-long trend away from active fiscal policy. The general distrust of fiscal policy may well have made sense; many economists are more likely to trust the technocrats at the Fed to manage the business cycle than the election-driven politicians on Capitol Hill. But in a world of low interest rates in which the Fed is frequently hamstrung, we may not have that choice.
WUHAN, China — Russell Abney raised two children on solar power. The 49-year-old Georgia Tech graduate worked for the last decade in Perrysburg, Ohio, a suburb of Toledo, pulling a good salary as an equipment engineer for the largest American solar-panel maker.
On the other side of the world, Gao Song boasted his own solar success story. A former organic fruit retailer who lives in the dusty Chinese city of Wuhan, he installed solar panels on his roof four years ago and found it so lucrative that he went into business installing them for others. By last summer, he and a team of 50 employees were installing solar-panel systems on nearly 100 roofs a month.
Then China shook the global solar business — and transformed both their lives.
“A small vibration back in China,” said Frank Haugwitz, a longtime solar industry consultant in Beijing, “can cause an avalanche in prices around the world.”
Late last summer, Chinese officials began publicly toying with slashing the subsidies they offer domestic solar-panel buyers. Mr. Gao’s business dried up, and he laid off half his workers. “I have been working hard and was just off to a good start,” he said. “Now I have to start over.”
China’s solar-panel makers cut their prices by more than a quarter to compensate, sending global prices plummeting. Western companies found themselves unable to compete, and cut jobs from Germany to Michigan to Texas and points beyond.
Those points included Perrysburg — where Mr. Abney and about 450 other employees suddenly found themselves out of work. “Within just a few months, it all came crashing down,” Mr. Abney said. “It’s like a death in the family. People feel awkward talking about it.”
President Trump, who pressed President Xi Jinping of China on trade and other issues this week when they met at Mar-a-Lago in Palm Beach, Fla., has vowed to end what he calls China’s unfair business practices. Much of his oratory has involved old-fashioned smokestack industries like steel — industries in which the jobs were already disappearing even before the rise of China.
But economists and business groups warn that China’s industrial ambitions have entered a new, far-reaching phase. With its deep government pockets, growing technical sophistication and a comprehensive plan to free itself from dependence on foreign companies, China aims to become dominant in industries of the future like renewable energy, big data and self-driving cars.
With solar, it has already happened. China is now home to two-thirds of the world’s solar-production capacity. The efficiency with which its products convert sunlight into electricity is increasingly close to that of panels made by American, German and South Korean companies. Because China also buys half of the world’s new solar panels, it now effectively controls the market.
For much of the past century, the ups and downs of the American economy could spell the difference between employment or poverty for people like Chilean copper miners and Malaysian rubber farmers. Now China’s policy shifts and business decisions can have the same kind of global impact once wielded by power brokers in Washington, New York and Detroit.
The story of China’s rise in solar panels illustrates the profound difficulties the country presents to Mr. Trump, or to any American president. Its size and fast-moving economy give it the ability to redefine industries almost on a dime. Its government-led pursuit of dominance in crucial industries presents a direct challenge to countries where leaders generally leave business decisions to the businesses themselves.
Already, China is the world’s largest maker and buyer of steel, cars and smartphones. While it does not necessarily dominate those industries, its government ministries are moving to replicate that success with robots, chips and software — just as in solar.
Chinese panel makers “have the capital, they have the technology, they have the scale,” said Ocean Yuan, the chief executive of Grape Solar, a distributor of solar panels based in Eugene, Ore. Of American rivals, he said, “they will crush them.”
Rooted in Fish
Before he became one of the solar industry’s most powerful players, Liu Hanyuan raised fish.
The son of peasants from China’s hardscrabble southwest, Mr. Liu sold some of the family’s pigs in 1983 for what was then around $100 to buy some fish. Soon he went into the even more lucrative business of selling fish feed, and he eventually moved into pig feed and duck feed. The brand name, Keli, is a combination of the first and last Chinese characters from a famous paraphrasing of Karl Marx by Deng Xiaoping, the father of modern China: Science and technology are primary productive forces.
According to Mr. Liu’s authorized biography, he faced local criticism at first for his early embrace of capitalism, and responded by saying that his fish feed was an improved product that followed Deng’s dictum. “When my business grows bigger,” he said at the time, “I will build another floor for labs.”
Plans to shift into computer chips did not pan out, so by 2006, he shifted to solar technology, after taking control of a company that made chemicals for the production of polysilicon, the crystalline raw material for solar panels. That move proved fortunate: China was just then embarking on a concerted effort to become a solar-industry powerhouse.
Over the next six years, Beijing pushed state-owned banks to provide at least $18 billion in loans at low-interest rates to solar-panel manufacturers, and encouraged local governments to subsidize them with cheap land. China had more on its mind than just dominating solar exports: Its severe pollution problems and concerns that rising sea levels from climate change could devastate its teeming coastal cities lent urgency to efforts to develop green technology. At the same time, China also became a major player in wind power through similar policies.
With ample assistance, China’s solar-power production capacity expanded more than tenfold from 2007 to 2012. Now six of the top 10 solar-panel makers are Chinese, including the top two, compared with none a decade ago. The solar division of Mr. Liu’s company, the Tongwei Group, which discloses few financial details, is one of the fastest-expanding players in the industry.
That growth forced many American and European solar-panel manufacturers into a headlong retreat. Two dozen of them filed for bankruptcy or cut back operations during President Barack Obama’s first term, damaging the heady optimism then about clean energy.
In 2012 and 2013, the United States and the European Union concluded that Chinese solar-panel makers were collecting government subsidies and dumping panels, or selling them for less than the cost of producing and shipping them. Both imposed import limits. Chinese manufacturers and officials denied improper subsidies and dumping, and still do.
Several large Chinese manufacturers that had previously overexpanded and had been selling at heavy losses for years then closed their doors. But Western solar companies say Chinese banks still lent heavily to the survivors despite low loan-recovery rates from the defaults of big Chinese solar companies like Suntech, Chaori and LDK Solar.
“The main subsidy is massive, below-market loans by Chinese state-owned commercial banks to finance new capacity and also the massive ongoing losses of Chinese companies,” said Jürgen Stein, the president of American operations for SolarWorld, a big German panel maker.
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Li Junfeng, a top architect of China’s renewable-energy policies until he retired from that responsibility in early January, said that the West had exaggerated the role of the state in helping to finance Chinese solar-panel manufacturers. “The market can decide for itself,” he said. “The good companies can get money, the bad companies cannot.”
Like the Chinese solar industry as a whole, Tongwei is thinking bigger.
Mr. Liu’s company bought an enormous solar-panel manufacturing complex in central China in 2013 from LDK Solar, which had run into severe financial difficulties. Now it plans to build factories of five gigawatts apiece in the Chinese cities of Chengdu and Hefei. By comparison, the entire global market is only about 77 gigawatts each year, while world capacity is 139 gigawatts.
At the same time, Mr. Liu is dismissive of companies in the West that pioneered many solar technologies but have lost their market shares to China. “They are very jealous,” he said, “and cannot catch up with China’s pace.”
From an environmental standpoint, China’s solar push has been good for the world. Solar-panel prices have fallen close to 90 percent over the past decade. Many of the solar panels in America’s backyards and solar power plants are made by Chinese companies.
But for the solar industry, Chinese expansion could mean an extended period of low prices and cutbacks for everybody else.
“The solar industry is facing again, I would say, a new winter,” said Patrick Pouyanné, the chairman and chief executive of Total, the French oil and gas giant, which owns a controlling stake in SunPower, an American solar-panel maker.
China now hopes to replicate its solar industry’s growth in other areas.
Under a plan called Made in China 2025, China hopes to become largely self-sufficient within seven years in a long list of industries, including aircraft, high-speed trains, computer chips and robots. The plan echoes the solar-panel and wind-turbine buildup a decade ago, but with a larger checkbook. Made in China 2025 calls for roughly $300 billion in financial backing: inexpensive loans from state-owned banks, investment funds to acquire foreign technologies, and extensive research subsidies.
If successful, Made in China 2025 would represent a fundamental shift in how China deals with the world. Initially, most of the industries that moved to China, such as shoe and clothing production, were already leaving the United States anyway. Heavy industries such as steel followed. While the shift was profound — some economists estimate that up to 2.4 million American jobs were lost to China from 1999 to 2011, though others dispute that analysis — China has struggled in some areas like autos to create viable global competitors.
American and European business groups have warned that the China 2025 plan means that a much wider range of Western businesses will face the same kind of government-backed competition that has already transformed the solar industry.
“The policies started in solar and are now starting to infect the higher reaches of the economy with Made in China 2025,” said Jeremie Waterman, the president of the China Center at the United States Chamber of Commerce in Washington.
Ripples From Wuhan
In the end, China did not slash subsidies for rooftop solar panels, and cut them only slightly for large power-plant arrays. But prices barely rebounded from last year’s slump.
Mr. Gao, of Wuhan, is a slender 37-year-old whose dark hair is already thinning. He said that his business had depended not on homeowners but on profit-minded investors who made use of the subsidies.
The investors would pay three-fifths of the cost of a homeowner’s system. The homeowner would take only enough electricity from the panels to power the home. The investor would sell the rest of the electricity to the grid at a high, government-assisted price.
The suggestion that the government might cut the subsidy, even though the government did not follow through on it, panicked his investors. So they stopped financing further deals.
“They fear that the year after next, they may have nothing,” he said. He recently hired four more employees to drum up sales, even as installations creep along at a small fraction of demand a year ago.
In Perrysburg, Mr. Abney lost his job at First Solar, the largest solar-panel manufacturer based in the United States, and looked in vain for a job in the auto industry in the Toledo area. He ended up taking a job three weeks ago at a building materials company in Lancaster, Pa. His daughter is going off to college in the autumn, while his wife and son, a high school freshman now, will follow him to central Pennsylvania this summer.
“It’s hardest on him because we’re pulling him away from his high school and his activities,” Mr. Abney said.
First Solar struggled with improving Chinese technology as well as dropping prices.
It laid off workers in Perrysburg partly because it decided not to produce its Series 5 generation of panels, which represented a limited improvement over its existing Series 4 panels. First Solar, to better compete with Chinese producers, will wait for its lower-cost, high-efficiency Series 6 panels to be ready for production in 2018. In the end, First Solar, which is based in Tempe, Ariz., laid off 1,600 people worldwide.
“It’s just kind of a shock factor when a lot of families realize they’re no longer going to have a job,” said Michael Olmstead, the Republican mayor of Perrysburg.
Though Mr. Abney has started his new job at almost the same pay as his previous one, he says part of him pined for the days when the United States still led in solar energy, and when First Solar was at the forefront of that leadership.
“They were good for us,” he said. “And it was great while it lasted.”