BEIJING (Reuters) -Chinese producers of polysilicon, a building block for solar panels, are in talks to create a 50 billion yuan ($7 billion) fund to acquire and shut down roughly a third of production capacity and restructure part of the loss-making sector, GCL Technology Holdings said.

The top polysilicon producer told Reuters on Thursday plans were being discussed to acquire and shut at least 1 million metric tons of lower-quality polysilicon capacity.

"It is sort of like the OPEC of polysilicon industry, wherein total supply for a specified timeframe has to be agreed by the central committee and production quotas to be allocated to producers," GCL's investor relations director Jun Zhu said.

The plan is one of the strongest signals yet that the heightened rhetoric against overcapacity rolled out by the government this month is translating into action. Chinese industry, from solar to electric vehicles, is grappling with massive overcapacity and vicious price wars that are wiping out profits.

GCL Chairman Zhu Gongshan said at an industry conference in June that major firms were working to restructure the industry, while local media reported producers were in talks to create an acquisition fund. Reuters is reporting the size, scope and timing of the plan for the first time.

State planner the National Development and Reform Commission did not immediately respond to a request for comment.

The proposed closures would leave approximately 2 million tons of capacity remaining in the market, Jun Zhu said.

China's production capacity was 3.25 million tons at the end of 2024, according to figures from consultancy Bernreuter Research, indicating the proposed closures would comprise some 38% of capacity.

President Xi Jinping in early July called for an end to "disorderly price competition," and three days later the industry ministry pledged to calm price wars and retire outdated production capacity during a meeting with solar industry executives.

This rhetoric, combined with initiatives from various ministries and provincial governments have sent prices of industrial commodities soaring in recent weeks in anticipation of supply side reforms. Polysilicon prices are up nearly 70%.

The platform would be launched in the late third quarter of 2025 and would start making purchases in the fourth quarter, both of excess capacity and of market inventories, Jun Zhu said.

The fund's central committee, tasked to "make sure polysilicon prices fluctuate at a price range beneficial to all stakeholders", would be made up of polysilicon producers, platform creditors, and potentially regulators, he said. ($1=7.15 yuan)