Suntech Power Holdings, which until recently was one of the world's largest producers of solar panels, has announced the bankruptcy of its main subsidiary in China.

Suntech's fall is being viewed by analysts as a sign of the Chinese solar industry's possibly declining fortunes.

Suntech, one of the world's largest solar giants, which once made its owner Shi Zhengrong the richest man in China, has been unable to clear its 7.1 billion yuan debt. Shi Zhengrong knows exactly what went wrong with the company.

Shi, the founder of Suntech Power Holdings, said, "From late 2009 to 2011, over investment created overcapacity. I know that over 100 cities have been building solar industrial parks."

This led to a bubble in China's over heated solar panel industry. The situation worsened after Europe and the US filed anti-dumping cases against Chinese solar panel producers. With relentless expansion of production scales and a shrinking overseas market, many Chinese solar companies collapsed, starting with the small and medium sized companies. But the fall of the industry giant was something even its competitors didn't expect.

Chairman of Yingli Solar, Miao Liansheng, said, "Customers focus on product duration, banks focus on debt issues. A lot of problems have arisen. What has happened to Suntech is extremely unfortunate."

The sharp decline of the whole industry is reflected clearly on balance sheets. Industry insiders say the 20 million kilowatt global demand for solar energy each year has been overwhelmed by twice the needed supply. The excess capacity has pushed many solar panel companies out of the game.

China's solar industry, which once had great support from the government, is now struggling with the consequences of irrational expansion.