China's polysilicon industry is hanging on by a thread, with its survival threatened by cheap imports and sluggish demand, according to a report released by China's silicon industry association.

Thirty-seven of 43 Chinese polysilicon (a raw material widely used in solar panels) manufacturers have suspended production. The other six are operating at 30 percent of their production capacity now, the report said.

A few producers have said they support a proposal to impose anti-dumping duties on polysilicon imports from the European Union, South Korea and the United States.

Ma Haitian, author of the report, said: "The delay in taking action against unfair competition has severely hit the confidence of producers, who have no choice but to wait."

The report said it is clear that overseas polysilicon producers are dumping their products on the Chinese market at prices lower than they cost to make. The biggest exporters, including the EU, South Korea and the US, together have gained a stranglehold of at least 75 percent of the market share in China, he added. Analysts said the trade conflict between the EU and China over solar products has delayed decision-making from Beijing on the polysilicon issue.

China and the EU are holding talks to defuse punitive duties that may be imposed on 21 billion euros of imported Chinese solar cells, wafers and panels. Reuters reported officials from Europe and China said negotiations in Beijing were going well and they aimed to agree a minimum price for Chinese importers above their production costs, although numbers are still fluid.

Following a report from both sides on the progress to reach consensus, Bloomberg on Tuesday quoted a source from the German Economy Ministry as saying that China would not impose retaliatory tariffs on imported polysilicon. The Chinese Ministry of Commerce declined to confirm the news on Tuesday.

The import volume of polysilicon reached 34,339 tons from January to May in 2013, 0.91 percent up year-on-year. The price fell to $18.33 a kilogram, 27.7 percent lower than the average price in 2012, the report said. Xu Weimin, board secretary of east China's Jiangsu-based Sunshine Co Ltd, said the company will withdraw from the polysilicon industry.

The former wool textile and garment giant set up a holding company focusing on the polysilicon business in 2008. It suffered huge losses from 2012 and was declared bankrupt in March.

"We thought the polysilicon business would be a new growth engine for the company. The price was $500 a kilogram. We estimated it would take only one or two years to recoup the investment. No one expected the following financial crisis and European recession or that the price would slump to $18 a kilogram," he said.

Erdos Group, another listed company based in north China's Inner Mongolia, recently failed to find a buyer to take over its 3 billion yuan investment in a polysilicon business and had to suspend operations at the plant, the China Business Journal reported last week.

The production line rusts easily if it is not used for a long time. The industry is facing an even tougher reality and may even die out unless demand for polysilicon increases in the second half of 2013, the report said.