Goodwill or necessity? Why is China slashing solar and battery subsidies?
Analysts expect policy will signal to Europe that Beijing is interested in serious trade relations and is a good partner
Authorities will cancel export value-added tax rebates for solar panels and lower rebates for batteries from 9 per cent to 6 per cent from April 1.
The rebates for batteries will be cancelled on January 1, 2027, according to the joint statement released on Friday by the Ministry of Finance and the State Taxation Administration.
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The China Photovoltaic Industry Association (CPIA) praised the measure as a move that could aid a “rational recovery” of prices in overseas markets and lower the risk of trade frictions while also easing the government's fiscal pressure, according to a CPIA statement published on Friday following the announcement.
China has been gradually reducing the VAT rebates for the two products in recent years. The latest move before Friday’s announcement came at the end of 2024, when authorities lowered the refund rate from 13 per cent to 9 per cent.
In its statement, the CPIA admitted that the VAT rebate scheme had affected the industry’s interests and international image. It had also eroded the profits of domestic producers because the subsidies had been factored into price talks with overseas buyers, effectively becoming a subsidy for those buyers.
The point was echoed by analysts, who said they saw no need for a tax refund scheme to keep these products competitive given their dominant market position.