LONGi Green Energy: Navigating Regulatory Crossroads in China's Solar Sector

The solar energy sector is a battleground of regulatory volatility, geopolitical tensions, and corporate survival. Nowhere is this clearer than in the case of LONGi Green Energy Technology, where the recent stake movements of its second-largest shareholder, HHLR Advisors, underscore the high-stakes interplay between regulatory compliance and strategic adaptation.

The Regulatory Tightrope

In late 2023, HHLR Advisors, a unit of Hillhouse Capital, faced scrutiny from China's Securities Regulatory Commission (CSRC) after reducing its 5.85% stake in LONGi to below the 5% disclosure threshold without proper notice. The CSRC investigation revealed that HHLR had loaned shares to temporarily dip below the threshold—a move that violated transparency rules. To resolve the issue, HHLR repurchased 1.3 million shares by April 2024, restoring its stake to 5%, and agreed to surrender any profits to LONGi. This episode highlights the growing regulatory rigor in China's markets, where institutional investors must now tread carefully to avoid penalties or reputational damage.

Note: The data would show LONGi's stock plummeting over 70% from its 2021 peak, reflecting broader sector headwinds.

Strategic Pivots Amid Industry Collapse

The solar sector itself is in crisis. LONGi's 2024 net loss of ¥8.62 billion and a 36% revenue drop to ¥82.58 billion underscore the devastation caused by collapsing prices—module prices fell 39% in 2024, while wafer prices dropped 61%. To survive, LONGi's founder, Li Zhenguo, stepped down as CEO in May 2025 to focus on R&D, handing leadership to Zhong Baoshen, a seasoned manager from state-owned enterprises. Zhong's mandate is clear: cut costs and stabilize operations.

This leadership shift marks a strategic pivot from innovation-driven growth to operational discipline. Yet skepticism persists. LONGi's stock has fallen 8.15% year-to-date, and investors question whether Zhong's cost-cutting can outweigh systemic risks like overcapacity and trade wars.

U.S.-China Trade Wars: A Sword of Damocles

The regulatory risks extend far beyond China. In April 2025, the U.S. imposed punitive tariffs on solar imports from Southeast Asia, targeting Chinese manufacturers like LONGi. A temporary May 12 deal reduced tariffs from 125% to 10% for 90 days—a fragile reprieve. If negotiations fail, LONGi's U.S. exports (a critical revenue stream) could collapse. Meanwhile, China's retaliatory tariffs on U.S. goods and export controls on rare earth minerals have deepened the conflict.

Note: The data would show prices bottoming out in late 2024, coinciding with LONGi's aggressive capacity expansions.

ESG Compliance and Investor Trust

Adding to LONGi's challenges is the U.S. ESG crackdown. Eighteen states now restrict the use of ESG factors in public fund investments—a blow to firms reliant on global capital. HHLR, a major LONGi investor, must navigate this patchwork of regulations to avoid missteps. LONGi's governance struggles (e.g., its 2024 asset impairments of ¥34 billion) further complicate its ability to attract ESG-conscious investors.

Investment Implications: A High-Reward, High-Risk Play

LONGi's story is one of strategic resilience in a fractured landscape. On the downside:
- Tariff Uncertainty: The U.S.-China truce is temporary; further trade escalations could cripple exports.
- Overcapacity Costs: LONGi's aggressive expansions (e.g., 50 GW HPBC 2.0 cell capacity by 2025) risk exacerbating oversupply.

On the upside:
- Cost Leadership: Zhong's focus on operational efficiency could position LONGi as a “survivor of the leanest.”
- Technological Edge: N-type TOPCon technology and R&D investments may secure LONGi's dominance in the next efficiency wave.

Final Take

LONGi is a high-risk, high-reward bet for investors with a multi-year horizon. Its valuation reflects pessimism, but its scale, R&D pipeline, and domestic market strength suggest a turnaround is possible—if regulatory storms subside. For now, wait for clarity on U.S.-China trade terms and monitor LONGi's cost-cutting progress.

In the solar sector's brutal shakeout, LONGi's fate hinges on whether its strategic pivots and regulatory compliance can outpace the headwinds. The stakes—both financial and geopolitical—could not be higher.