China’s Ministry of Finance and the State Taxation Administration recently issued the Announcement on Adjusting Export Tax Rebate Policies for Photovoltaic and Other Products (2026 No. 2), sending shockwaves through the solar industry.

Key policy provisions:

Effective April 1, 2026, VAT export tax rebates on photovoltaic and related products will be fully eliminated. The rebate rate on solar cells will be reduced from 9% to 6% starting April 1, 2026, and will drop to zero from January 1, 2027.

These adjustments mark the formal end of years of fiscal subsidies for solar exports, officially ushering China’s photovoltaic industry into a “zero-rebate era.” This is not merely a tax policy change — industry observers regard it as the opening of a new chapter in sectoral restructuring.

I. Why Eliminate the Rebate? The Core Goal: Ending the “Involution” Race

For years, China’s solar industry has been mired in a destructive cycle of low-price competition. Despite multiple rounds of government initiatives aimed at addressing this “involution” problem, results have remained limited.

Since 2025, the Ministry of Industry and Information Technology and other agencies have issued a series of policies aimed at optimizing the industry structure with a clear objective: curbing irrational price competition and restoring healthy market development. Yet in practice, the price war did not stop — it extended from domestic markets to overseas ones.

Industry research has found that some companies factored export tax rebates directly into their pricing, using government tax relief as a hidden subsidy to overseas buyers in order to win contracts. The China Photovoltaic Industry Association publicly noted that some enterprises used rebates to artificially lower their bids, continuously squeezing industry-wide margins.

The consequences were clear:

• Severe erosion of corporate profits
• Escalating global price wars
• Rising risk of trade frictions
• Industry trapped in a “sell more, lose more” spiral

Against a backdrop of excess capacity, tax rebates were actually amplifying destructive competition. Eliminating them is therefore seen as a critical step in restoring rational pricing across the industry.

II. An Inevitable Policy Response to Supply-Demand Imbalance

The fundamentals of the solar industry clearly reflect a significant supply surplus:

• Domestic polysilicon compliant capacity: ~2.4 million tonnes
• Global reasonable demand: ~1.5 million tonnes
• Full solar supply chain nominal capacity: over 1,100 GW
• Projected 2026 global new installations: ~500 GW

This supply-demand mismatch means that continuing to rely on tax rebates to sustain exports would only prolong the price war indefinitely. Some companies are even using rebate income to fund cash flow and secure orders through ultra-low pricing — further depressing margins across the board.

From a policy standpoint, eliminating the rebate is not just a fiscal adjustment — it is a structural intervention designed to drive the industry toward healthier development. In short: to end predatory competition, the source of below-cost subsidies must first be removed.

III. Near-Term Shocks Following Policy Implementation

The most immediate impact of the new policy is higher export costs. Industry estimates indicate:

• Per-module export profits will decline noticeably
• Margins for second- and third-tier manufacturers will be further compressed
• Low-margin enterprises face significant survival pressure

The impact will be particularly severe for OEM factories and small-to-medium enterprises that were already operating on thin margins.

Meanwhile, the clear timeline of the policy change has triggered a rush-to-export phenomenon in the market:

• Overseas buyers demanding shipments before end of March
• Factories running overtime to meet orders
• Q1 orders concentrated and front-loaded

While this concentrated shipment activity may temporarily boost export figures, it will deplete forward demand and create phased market volatility in subsequent quarters.

IV. Industry Differentiation Will Accelerate

In the longer term, the elimination of the rebate functions as a “stress test” that will rapidly separate winners from losers.

Leading companies with advantages in technology, cost structure, and brand equity will find new expansion opportunities. In contrast, small and mid-sized players reliant on price competition and lacking technological differentiation may face:

• Profit margins reaching zero
• Order volumes declining
• Forced market exit

As the industry enters a phase of rational competition, the trend toward “the strong getting stronger and the weak being eliminated” will become increasingly pronounced.

V. The Logic of Going Global Has Fundamentally Changed

The rebate elimination will also profoundly reshape the global strategy of Chinese solar enterprises.

The old model:

Low-cost manufacturing + tax rebate advantage = export competitiveness

The new model:

Localized production + technology and brand equity = core competitiveness

As trade policies in Europe and the United States continue to tighten, establishing overseas manufacturing facilities is shifting from a strategic option to a strategic necessity. Only through localization can companies effectively circumvent tariff barriers and trade restrictions.

VI. One Era Ends — A New Cycle Begins

The withdrawal of solar export tax rebates officially marks the end of the era defined by policy tailwinds and low-price expansion.

Future competition in the industry will no longer be a simple price contest, but a contest of comprehensive capabilities:

• Technological innovation capacity
• Cost management excellence
• Global strategic presence
• Brand strength and service quality

It is foreseeable that the solar industry will enter a period of deep adjustment over the coming years. The companies that will survive and thrive through this cycle will inevitably be those equipped with genuine core competencies and coherent global strategies.

For the industry as a whole, this policy transformation is both a challenge and a pivotal step toward higher-quality, more sustainable development.