Suntech Power Holdings was once the biggest solar-panel maker in the world by production volume, its founder Shi Zhenrong was the richest man in China and the offshore parent company was listed in New York with a market capitalisation of $16bn.

Then in March, Wuxi Suntech, its principal subsidiary, filed for bankruptcy under China’s new revitalisation law. Chinese banks are owed about $2.3bn by the mainland entity according to filings as of year-end 2011. Creditors to the offshore parent, a group with claims of almost $600m that includes several hedge funds as well as the IFC arm of the World Bank, are also attempting to recover their loans. The offshore parent has not filed for bankruptcy and is still operating.

The case is being watched closely as China tries to reconcile its competing priorities. It isn’t clear what Suntech’s ultimate fate will be – whether the Chinese units will be bailed out in the name of job creation and social stability; or made prey for a healthy competitor as part of a much needed rationalisation of the solar industry; or even left to fend for itself. The outcome will provide clues to the choices Beijing makes at this inflection point in its economic growth and development model – as well as clues about whether local governments resist or adhere to edicts from the capital.