BEIJING, Oct 29 (Reuters) - Shares in China's solar companies jumped on Wednesday after an industry executive told state media that leading firms were forming an association, raising expectations that the industry would move forward with a plan to pare back overcapacity.

"Seventeen companies have basically already signed. We are building an association," the chairman of polysilicon producer GCL Technology Holdings (3800.HK), opens new tab, Zhu Gongshan, told CCTV on Tuesday night. "We are making an effort to complete it this year."

Some market participants interpreted the comments as related to a proposal introduced by GCL in July that would see China's largest producers of polysilicon, a building block for solar cells, create a fund to acquire and shut down a portion of the sector's bloated capacity. GCL said at the time that the acquisition fund would launch in the third quarter.

Polysilicon producer Tongwei (600438.SS), opens new tab closed up 10% on Wednesday and top solar equipment manufacturers Trina Solar (688599.SS), opens new tab and Longi Green Energy (601012.SS), opens new tab rose 11% and 10%, respectively. The Hong Kong exchange, where GCL is listed, was closed on Wednesday for a public holiday.

The CCTV segment detailed the central government's repeated calls since July to address overcapacity and unsustainable competition in the solar sector, and reported that the industry is scaling back production.

CCTV found that at Longi's Xian operations, nine of 15 production lines were closed for upgrades.

And an employee at a Jiangsu polysilicon factory told CCTV the company was adhering to production limits set by the industry association.

But global solar demand is also falling, Zhu said. It is expected to reach 480 gigawatts (GW) next year, down from 520 to 540 GW this year, he said, calling the drop a "new inflection point" for an industry that has seen demand grow for years.