Tongwei Co, Ltd, one of China’s largest solar manufacturers, plans to acquire at least 51% of a smaller rival, as consolidation accelerates in an industry grappling with oversupply and losses.

The company plans to make Jiangsu Runergy New Energy Technology Co, Ltd a subsidiary by buying a majority stake for up to five billion yuan (US$700 million), it said in a filing on the Shanghai Stock Exchange on Tuesday. 

China’s world-leading solar sector is drowning in factory overcapacity and price wars that have hit industry leaders like Tongwei and smaller producers alike. Key figures like the head of the China Photovoltaic Industry Association, Wang Bohua, have called on the government to push struggling manufacturers to exit the market as soon as possible, to reduce severe overcapacity in a sector that’s vital to the energy transition.

The deal is expected to “improve the overall efficiency of the industry, and further consolidate the company’s leading competitive advantage in the global photovoltaic sector,” Tongwei said in the filling. Runergy has built up “competitive” production capacity in the US, Thailand and Vietnam, which will help consolidate Tongwei’s overseas market share, it added. 

Tongwei’s share price closed 1.62% at 18.87 yuan higher on Wednesday.

  - Bloomberg