China to address world’s overcapacity concerns by cutting export-tax rebate

Move seen discouraging vicious low-price competition and outsized industry expansions, and Chinese manufacturer profits could take a hit

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A worker monitors a solar-panel production line in China’s Zhejiang province. Photo: AP

Published: 5:15pm, 18 Nov 2024

China will lower its tax rebates for exports of solar and lithium battery products, seeking to ease international concerns about overcapacity in its new-energy sector, which has led to rising trade tensions.

The move will increase the costs for manufacturers and export prices, discouraging vicious low-price competition and excessive expansion of the industry, according to insiders.

This could help manage losses amid a potential sudden collapse of external demand, such as in the case of a second trade war being launched by the United States, they added.

Effective December 1, the export-tax-rebate rate for 209 products, including some refined oil products, photovoltaics, batteries and certain non-metallic mineral products, will be reduced from 13 per cent to 9 per cent, according to a joint statement from the Ministry of Finance and State Taxation Administration on Friday.

The country will also cancel the tax rebate for 59 other goods, including aluminium and copper products, the statement said.

An executive with a Jiangsu-based manufacturer of solar panels said a key reason for the reductions is that the solar industry has become too “involuted”, or nei juan in Chinese – an anthropological term originally used to explain a process in which additional input cannot produce more output. Over the past year or so, the term has become synonymous with being locked in an endless cycle of self-defeating competition.