Price deal to keep Chinese solar panels in EU

In response to the EU's move to impose duties, China launched an anti-dumping inquiry into European wine sales, which may have led to exporters in France, as well as Spain and Italy, being hit with retaliatory duties.

Trade frictions between China and the EU intensified sharply earlier this year, sparking fears of a trade war between the two major trading powers. As a result, China's trade volume with the EU shed 1.9 percent during the first quarter this year to $124.4 billion.

Europe is China's most important trading partner. For the EU, China is second only to the United States. Chinese exports of goods to the bloc totalled 290 billion euros in 2012, with 144 billion euros in European exports going to China.

The State Council, China's cabinet, unleashed a raft of measures on June 14 to open up the domestic photovoltaic (PV) market to help domestic solar panel producers amid the increasing trade tensions abroad.

Chinese Premier Li Keqiang said the development of the domestic PV sector is also in line with China's initiatives to upgrade its industrial operations.

Some have expressed concerns that the limit on PV exports may result in furious competition among domestic players.

Analysts say that China's solar industry is bracing for a major reshuffle after years of trade rows with the EU and the US as well as growing pressures from overcapacity.

Ren Haoning, an energy industry researcher with CIC Consulting Company, said the future industrial landscape will witness fewer upstream polysilicon producers, but more downstream PV power stations, to cut excess production capacity.

"The domestic demand is lagging far from digesting the nation's solar panel capacity," Ren said. "In the next decade or two, overall production capacity will shrink to maintain a relative balance."