More than 90 percent of China's polysilicon producers have suspended production, and are awaiting government action to help improve their competitiveness after being squeezed by oversupply and an influx of overseas products.

Just a handful of the 60-plus producers of polysilicon, the main raw ingredient in panels that turn sunlight into electricity, were believed to be still in production by the end of 2012, according to the Securities Times, citing official industry figures. Industry insiders now think mergers and acquisitions are sensible to achieve better economies of scale.

A report released last week by Mingsheng Securities noted that the output capacity of domestic polysilicon producers is still more than 100,000 tons, enough to produce more than 20 gigawatts.

But it added: "There will be a huge surplus, considering our expectation for 2013's silicon-based module output of 15 gigawatts."

Instead of trying to save all the companies, the authorities should take the opportunity to consolidate the industry, eliminating small-scale companies with low efficiency, the report said.

Xue Jing, assistant general manager of Winsun New Energy, a company specializing in producing silicon wafers, said: "The price of imported polysilicon has been brought down since the authorities launched anti-subsidy and anti-dumping investigations into imported polysilicon last year."

But Xue added that if prices were the same for local and imported products, many would consider it more reasonable to buy imported ones, as the quality is better.

China launched an investigation on Nov 27 to determine whether retrospective duties should be levied on imported solar-grade polysilicon from Europe, South Korea and the US.

The investigation was launched after the US and Europe said they were considering imposing heavy anti-dumping and anti-subsidy duties on solar panels made in China.

The Ministry of Commerce is expected to issue a preliminary ruling on those investigations on Feb 20, the 21st Century Business Herald has reported.

Business insiders are expecting the introduction of 20 percent duties on polysilicon products from these countries, China Business News reported on Wednesday.

Shares in Chinese polysilicon makers have bounced back recently, based on the expectation of increased business as a result. Daqo New Energy Corp, for instance, has risen 64 percent, and GCL Poly Energy Holdings Ltd 44 percent over the past month.

Domestic polysilicon producers are considered less competitive than their overseas counterparts. The average costs for Chinese companies range from $40 to $50 per kilogram, almost twice the cost of the more advanced foreign products.

Imports account for more than 60 percent of the Chinese market, up from 45 percent in 2011, Securities Times said.

The Central Economic Work Conference held in mid-December noted that several industries in China, including polysilicon manufacture, are suffering from "obvious oversupply", and urged restructuring efforts to cut excess production capacity, and for resources to be concentrated on companies with better technology and management.

In November, the country's largest utility company, the State Grid Corp, launched a free service that allows PV solar power producers to connect to the national grid, a move considered "very encouraging" by industry experts.

According to the new policy, State Grid branches at city level will have the right to approve small-scale, self-supporting distributed solar power plant projects with installed capacities of less than 10,000 kilowatts to be connected to the grid. "I believe the future is bright. But the process will be painful," said Xue.