While the debate and the mystery regarding a possible bailout of China's solar giant Suntech is still going on, the latest news is that the founder and the CEO of Suntech reportedly face legal actions from the China government! According to reports from China Daily, The Australian, and the Sydney Morning Herald, the founder, Shi Zhengrong, and CEO, David King, have been prevented from leaving China. But Shi is an Australian citizen. Therefore, according to the report from the Sydney Morning Herald, a spokesperson from the Department of Foreign Affairs and Trade of the Australian government said Shi has not been barred from leaving China.
China Daily added that earlier media reports have claimed the Suntech founder has been doing suspicious transactions such as having Suntech procure solar materials from a polysilicon firm under his name.
The reports about the travel ban come after Suntech's announcements regarding its China-based subsidiary, Wuxi Suntech, entering into insolvency and restructuring due to a petition filed by eight China-based banks. The local court in Wuxi, China, where Suntech is headquartered, accepted the petition on March 21.
Despite the possibility of legal actions against its top executives, the China government is likely to bail out the solar giant. It is too big to fail. Suntech is a solar module maker that partners with solar cell, wafer, and polysilicon firms around the world. The livelihood of many depends on Suntech, not to mention international investors. Suntech is listed on the New York Stock Exchange, but the firm is registered in the Caymen Islands while its assets are in China, said a report from Reuters. In addition, Suntech employs around 200,000 people around the world.
Wuxi Guolian, a holding company owned by the Wuxi government, is reportedly THE ONE that is most likely to take over Suntech. However, oddly, Reuters reported that a spokesperson from the government-owned firm said he had no information on any plans regarding a bailout for Suntech. The report continued with the person stating that if there is any news regarding the restructuring of Suntech, it will be released through Wuxi Guolian. So, is there a bailout for the solar giant? Who knows.
The relationships between the local businesses and the government in China often take place behind closed doors, or through "back doors." International investors are probably not the top priority for the China government; the local banks are. According to China-based media Xinhua, Suntech owed nine China-based banks up to CNY7.1 billion (US$1.14 billion) as of the end of February. Maybe after the bailout by Wuxi Guolian, Suntech will be able to return to production and gradually pay off its debts. But there is also a possibility that the firm will not get the bailout and collapse, possibly causing unemployment and social unrest in China. But, on the bright side, if the China government refuses to bail out Suntech, it might gain a bargaining chip to ask Europe to abolish its anti-dumping and anti-subsidy investigation against China-based firms. So who knows? The fate of Suntech may change the fate of a lot of people.