The downward price pressure on solar technologies looks set to continue after the Chinese government indicated it will respond to recent falls in prices by upping production of key polysilicon and solar cell supplies.

According to reports, the Ministry of Industry and Information Technology posted a new five-year plan on its website last week detailing how “leading” polysilicon and solar cell manufacturers will be required to increase production capacity.

The plan provided no details on how many firms will be affected, but it did confirm that it wants top polysilicon firms to increase annual capacity to 50,000 tons, while solar cell manufacturers will be required to produce 5MW of new capacity each year.

The targets increase the likelihood of continued low solar prices following a slump in the cost of solar panels, which has seen prices more than halve over the past year, according to analyst firm Bloomberg New Energy Finance.

The new plan represents good news for firms looking to install solar technologies, but will also increase pressure on western solar panel manufacturers already facing squeezed margins and intense competition from Chinese firms.

Sean McLoughlin, industry analyst for HSBC Holdings Plc in London, told news agency Bloomberg that the pledge to increase capacity is “not a positive” for Western producers as the solar market is already experiencing over-supply.

The move will both increase the likelihood of consolidation in the solar manufacturing market and reinforce government efforts to curb solar incentives in line with the long-term reduction in panel costs.