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China has cut export tax credits for solar products, reducing the taxes refunded to Chinese photovoltaic exporters and eroding their profit margins. The move could force some companies to raise export prices to mitigate potential financial losses.
Chinas Ministry of Finance and State Administration of Taxation have announced a reduction in the export tax credit for photovoltaic products. Starting from December 1, the tax credit for unassembled solar cells (HS code 85414200) and assembled photovoltaic modules (HS code 85414300) will drop from 13% to 9%.
The cut will reduce the taxes refunded to Chinese exporters of photovoltaic products, reducing profit margins. Companies could respond by raising export prices to offset potential losses.
“While the reduction in the export rebate rate will have minimal impact on the production costs of Chinese PV manufacturers, it is likely to provide support to overseas prices, aiding a potential recovery,” said research firm Shanghai Metals Market (SMM). “However, whether prices actually rise depends largely on the supply and demand dynamics in the respective regions.”
The adjustment follows a year of declining PV product prices, driven by increased production capacity across the sectors value chain. In October, domestic bid prices in China fell below 0.62 yuan ($0.08)/W, which is widely considered below the cost of production.
To prevent further price declines and significant financial losses, the China Photovoltaic Industry Association (CPIA) held a closed-door meeting with major PV manufacturers and state-owned energy companies in October.
They agreed on a “floor price” of 0.68 yuan/W, with state-owned power companies pledging to reject bids below this price in large-scale tenders, while manufacturers pledged not to underbid in national competitions.
Wang Shujuan, founder of Zhihui Photovoltaic, said the reduction in tax relief supports CPIAs efforts to stabilize prices, especially in international markets.
Some industry analysts, who spoke to pv magazine on condition of anonymity, said the reduction in the tax credit is part of a longer-term strategy.
As Chinese PV products dominate global markets, the government may end up eliminating export tax credits altogether.
This shift could push up international prices for photovoltaic modules while keeping Chinas major solar power manufacturers profitable.
"The reduction from 13% to 9% could be just the beginning," said one analyst, stressing the possibility of further adjustments in the near future. |
