China is using tax rebates to prop up its ailing solar industry. As reported by Chinese state news agency Xinhua, the country’s finance ministry will reimburse 50 percent of the VAT paid by solar companies from October. The special measure, intended to help relieve the financial pressure currently faced by the sector, will remain in place until the end of 2015. According to the report, China’s ten leading manufacturers have debts amounting to over CNY 100 billion, equivalent to more than EUR 12 billion.
China had already adopted a new stimulus package for the solar market in late August, according to which solar plants that mainly produce electricity for private consumption will receive the equivalent of five eurocents per kilowatt-hour (kWh). US market research company Mercom Capital estimates that 8.5 gigawatts (GW) of new solar capacity will be built in China this year – but it is a market which will be of only minimal benefit to foreign companies, say the analysts.
The recent funding for China’s solar industry is of particular relevance in light of the compromise reached not long ago in the trade row between China and the EU over dumping of solar products. The global solar industry suffers from overcapacity. Countless companies in Europe and the US have gone out of business, and China’s photovoltaic manufacturers alone are estimated to have production capacities of 50 GW. However, even the latest wave of financial support and market incentives may not be enough to take up the slack, with significant consolidation of the Chinese solar industry expected by analysts in the coming months.