China’s solar PV industry has been in recovery mode since 2013. The capacity utilization rate of PV firms has improved, the sector steadily continues to grow and new technologies have been developed, while the PV makers have seen their margins improve. Looking into 2016, the sector is expected to maintain growth, thanks to favorable policies and increasing market demand.

Here are the major developing trends.

China Moves into First Place in Installed PV Capacity

The global PV market recorded strong growth in 2015, with newly added installed capacity of more than 50 GW, increasing 16.3 percent from a year earlier and bringing the total to 230 GW. Established markets including Japan, the U.S. and Europe kept strong growth momentum, with newly added installed capacity of 9 GW, 8 GW and 7.5 GW, respectively. Meanwhile, emerging markets in India, Thailand, Chile and Mexico grew rapidly last year. China’s newly added installed capacity in 2015 is estimated at 16.5 GW, the highest worldwide for another year in a row, while the country’s total installed PV capacity is expected to exceed 43 GW, surpassing Germany’s to become the world leader.

The Sector Continues to Grow, While Corporate Profitability Shows Significant Improvement

Worldwide polysilicon production continued to rise, topping out at 340,000 tons in 2015, a rise of 12.6 percent over 2014. China’s polysilicon production stood at 162,000 tons, an increase of 19.1 percent year-on-year, while the country’s solar module production grew to 43 GW, an increase of 20.8 percent.

The top 10 module manufacturers in the country recorded an average gross margin of 15 percent. Many Chinese makers have begun to build plants overseas. In the first half of 2015, China’s module manufacturers achieved a growth of 8.9 percent in sales, 9.7 percent in net profit and 6.5 percent in average net margin. In 2016, worldwide polysilicon production is expected to reach 360,000 tons, of which China is expected to account for 180,000 tons. The price for polysilicon is expected to remain at 110,000 yuan ($16,000) per ton.

Technologies Continue to Advance, While Production Cost Shrink

In 2015, the overall cost of production among Chinese PV makers shrunk to 90,000 yuan ($13,600) per ton, while the industry’s average comprehensive electricity consumption dropped to 100 kWh/kg, thanks to improved production processes. Meanwhile, production costs among leading module producers were reduced to 2.8 yuan per watt, as technologies for PV module encapsulation and anti light-induced degradation improved.

Looking into 2016, technological progress will remain the focus of the sector. The conversion efficiency of polycrystalline silicon cells in mass production is expected to exceed 18.5 percent, while that for monocrystalline silicon cells is expected to reach 20 percent. The power of main module products is expected to climb to 265 w to 270 w.

Investment in the Sector Continues to Rise, While M&As and Reorganizations Accelerate

China’s PV industry recorded 80.8 billion yuan ($12.3 billion) in investment for the first nine months of 2015, an increase of 35.8 percent from the same period of a year earlier, according to the Ministry of Industry and Information Technology. Many companies in the industry announced their plans for capacity expansion last year, according to EnergyTrend. Chinese PV companies have completed plants overseas with an overall cell production capacity of 1.7 GW and module production capacity of 2.3 GW. Last year, China’s Shunfeng International Clean Energy acquired both a Luoyang-based silicon company as well as U.S.-based cell module maker Suniva, in a move to further optimize its industry chain. Tongwei Group invested NT$850 million in Taiwan-based Gintech Energy. This year, Chinese PV companies plan to speed up their expansion plans in emerging markets, while aggressively pushing ahead their strategies to expand their global presence by building plants overseas and acquiring foreign makers.