Move expected to push up costs for Chinese manufacturers making it easier for them to compete in foreign markets with the latter’s high production costs, and also curb oversupply
Key Takeaways
- China has announced plans to cut down the export tax rebate for solar PV cell and modules
- According to the ministry, this rebate will come down from 13% now to 9% starting December 1, 2024
- The general view is that this is aimed at forcing manufacturers to curb excess production and thus check overcapacity concerns
The Chinese Ministry of Finance and the State Administration of Taxation have revealed that the country will reduce the export tax rebate for 209 products, including solar PV cells and modules from 13% to 9%, starting from December 1, 2024.
The export tax rebates are seen as China’s efforts to support its industries since this financial support from the administration enables companies to sell their products overseas for lower prices. A list of the 209 products is available here.
Yicai Global says the export tax rebate system was introduced by the Chinese government in 1985 under which it refunds some of the indirect taxes paid by local manufacturers on the production and distribution of export goods. This enables them to enter overseas markets tax-free. For solar, the rebate has been available since 2003.
According to industry experts, the move to bring down the export tax rebate is aimed by the administration at checking overcapacity concerns because of which prices in the PV industry have dropped to record lows. The end of the export tax rebate will push up the manufacturing cost of PV manufacturers, bringing down their profits as module prices will then not be as competitive. It will curb their production expansion.
As manufacturing costs go up for Chinese companies, their products will not be as cheap for overseas customers. In a way, this will narrow the difference between their production cost and those for manufacturers elsewhere.
On the other hand, market intelligence firm Shanghai Metals Market (SMM) believes that Chinese companies may end up passing on the increased costs in exports to overseas consumers. Hence, it may not impact the latter as much. Additionally, this may actually lead to a price rebound in the overall global PV industry.
Yet, most overseas markets already have high inventory levels, so the export volumes may not see ‘explosive’ growth due to the tax rebate cut.
According to the China Photovoltaic Industry Association (CPIA), Chinese solar PV export volume of $18.67 billion declined by 35.4% year-on-year (YoY), due to oversupply (see H1 2024 Chinese PV Export Volume Dropped By 35.4 Percent Annually, Says CPIA).
Earlier this year in July 2024, the Chinese Ministry of Industry and Information Technology sought public views on limiting excessive solar PV manufacturing in the country, but rather focus on technological advancements (see China’s MIIT Seeking Public Opinion On PV Manufacturing).
Source from Taiyang News
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