THE European Union is imposing duties on Chinese solar panels because its industry cannot compete with lower-cost and more efficient Chinese makers, the head of the Shanghai New Energy Industry Association said yesterday.

These factors and the scale of the domestic industry, which is the world's largest solar product maker, all translate into savings for Chinese companies.

Zhu Yuanhao, head of the association, said a Chinese company may only need 50 million yuan (US$8.1 million) to set up a manufacturing line with an annual capacity of 20 megawatts, compared with the 20 million euros (US$26.2 million) a European company needs.

"As Chinese solar companies are using more domestically-made machinery equipment in their factories, cost may further drop to 20 million yuan in the future," he said.

The EU started imposing initial tariffs of 11.8 percent from yesterday on Chinese solar panels, accusing the Chinese makers of selling products below cost - a practice known as dumping. The rate may rise to 47.6 percent on average, as initially sought by the EU, in August unless the EU and China come to a settlement.

Zhu's association told the EU not to forget that European makers of machinery and polysilicon - the raw material used to make solar panels - have gained from China's industry boom.