The decision by the U.S. Commerce Department to impose high anti-dumping and countervailing duties on exports of solar panels from China is expected to drive more Chinese photovoltaic (PV) enterprises to set up shop overseas.

Domestic firms will have to commit more to overseas production in the future in order to survive, especially if the European Union (EU) imposes duties on Chinese exports of solar panels and components next year, Wu Dacheng, a senior executive with the China Renewable Energy Society, an independent industry body, told Interfax on Monday.

The commerce department on Oct. 10 said Chinese companies were dumping solar cells and panels in the United States and set anti-dumping duties at 18.32 percent to 249.96 percent. Additional countervailing duties ranging from 14.78 percent to 15.97 percent were also set.

Some larger companies including New York Stock Exchange-listed (NYSE) Suntech Power Holdings and Trina Solar faced slightly lower duties after cooperating with investigators.

"The move means the cost of Chinese PV products in the United States will increase by up to 250 percent, but exported goods were no more than 20 percent cheaper than U.S.-made panels in the first place," said Wu. "Losing cost advantage will cost Chinese firms market share."

Although final approval of the duties is not expected from the International Trade Council until November, orders have already started to drop as buyers fear the imposition of retroactive tax bills. Chinese PV exports to the United States in June totaled $99.6 million, down approximately 60 percent from a year earlier.

The U.S. imported about $3.1 billion worth of solar cells and panels from China in 2011, accounting for less than 10 percent of total Chinese solar exports last year. By contrast, the EU imported 60 percent of all Chinese solar product exports in the same period.

Chinese companies could move production overseas by building manufacturing plants directly in target markets or low-cost countries in order to bypass the duties, said Wu. A group of prominent Chinese PV firms said in a statement that although the U.S. duties were "unreasonable," they would not give up the North America market.

Suntech has global supply chains and overseas manufacturing facilities and will continue to sell solar products to the United States that will not be subject to tariffs," E.L. McDaniel, managing director of Suntech America, said in a statement. Suntech has a plant in Arizona with annual capacity of 50 megawatts.

NASDAQ-listed Canadian Solar Inc. is considering plans to double production capacity in North America from 200 MW to 400 MW while NYSE-listed ReneSola Ltd. is expanding solar wafer production in Taiwan to 400 MW from 150 MW.

Overseas production is not a panacea though, experts cautioned, as higher production costs from labour to land will erode the price advantage enjoyed by China-based solar firms.

In addition to moving manufacturing capacity abroad, companies are targeting new markets with PV power plant projects and technical services. Hareon Solar Technology Co. Ltd. is planning to build a 122-MW solar panel power station in Romania while Winsun New Energy Co. Ltd. will establish PV power plants in Italy and Greece.

NYSE-listed Jinke Solar Holding Co. Ltd. said at the end of September it will provide technical support and components for a for a 50-MW solar power project in Kenya, which is expected to the largest facility of its kind in Africa and is being developed by state-owned China Jiangxi Corporation for International Economic & Technical Co. Ltd.

Closer to home, Beijing has announced plans to deploy RMB 250 billion ($39.5 billion) to boost installed solar power capacity to 20 gigawatts by 2015 from 0.86 GW in 2010, as it looks to create a domestic PV market and protect jobs.

Investing in foreign production is not an option for every solar firm, which some experts said is a good thing as it will shake out uncompetitive players. "Small-scale companies that do not have the means to make overseas investments will face elimination, which will result in a positive adjustment of the solar power industry," Lian Rui, a senior analyst with the research company Solarbuzz told Interfax.