UPDATE 1-China agrees to halt subsidies to wind power firms

Tue Jun 7, 2011 9:01am BST

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WASHINGTON/HONG KONG, June 7 (Reuters) - China has agreed to stop subsidizing wind power companies that use home-made parts rather than imports, a spokeswoman for the U.S. Trade Representative's office confirmed late on Monday.

The decision is a victory for the United Steelworkers union, which last year urged President Barack Obama's administration to challenge a swath of Chinese clean energy measures that it said violated World Trade Organization rules.

China's ministry of commerce could not be reached for comment.

USA Today, quoting U.S. Trade Representative Ron Kirk, reported on its website that China had agreed to stop providing the subsidies ranging from $6 million to $22 million.

"This outcome helps ensure fairness for American clean technology companies and workers," the newspaper quoted Kirk as saying.

The USTR is expected to announce details of the settlement on Tuesday in Washington.

The agreement comes as the Obama administration is struggling with continued high unemployment and concern about the ability of the U.S. economy to generate enough new jobs to bring down the unemployment rate.

Obama has highlighted green technologies such as wind power as a promising source of job creation.

But while the United States applauds China's decision to halt subsidies to wind power firms, the move is unlikely to prevent China's biggest power producers from moving ahead with plans to expand beyond China.

"Chinese wind power companies have reached a stage that irregardless of subsidies, they will head out and aim for overseas markets if there are opportunities," said Dennis Lam, analysts with DBS Vickers.

China's largest wind turbine makers Sinovel Wind Group Co and Xinjiang Goldwind Science and Technology - also among the world's biggest wind turbine makers - had announced plans to supply markets overseas. Goldwind established last year a wholly-owned U.S. unit in Chicago, marking its ambitions to serve the U.S. markets.

Analysts and industry executives in China believe any announcement from Beijing to halt subsidies to wind firms should be interpreted as a political gesture, and is unlikely to constitute major changes to China's overall policy of strengthening the industry.

"I wouldn't think this to be a major policy shift on the part of China. From the outset, the issue was more symbolic and more of a political gesture," said a senior executive at Suzlon Energy's China unit.

"Removing one or part of the subsidies offered manufacturers, won't mean a strategic shift from the overall policy framework," he said.

China has said its new five-year plan for renewable energy will include pledges to boost wind power capacity. The country has built the most wind power capacity in 2010, adding 18.9 gigawatts and bringing its total capacity to 44.7 GW, according to Global Wind Energy Council.

In 2010, China overtook the United States as the country with the most installed wind energy capacity. [ID:nLDE73517W] (Reporting by Doug Palmer and Leonora Walet; Additional reporting by Michael Martina; Editing by Jacqueline Wong)

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