China phases out tax incentives for solar and lithium battery industries

China is transitioning its tax policies for the ‘new three樣’ industries—electric vehicles, lithium batteries, and solar cells—from broad subsidies toward a more normalized regulatory framework. Key adjustments include the phased reduction and eventual elimination of export tax rebates for photovoltaic products and lithium batteries. Specifically, photovoltaic export tax rebates are set to hit zero by April 2026, while lithium battery rebates will decrease to 6% by mid-2026 before being eliminated in 2027.

Additionally, consumption taxes will be gradually reintroduced for lithium-ion and photovoltaic batteries starting in late 2026 and 2027. Experts suggest these moves represent a systemic calibration of national governance, shifting the focus from rapid scale expansion to quality improvement and tax fairness. This aligns with global trends as major economies move away from universal subsidies toward green tax adjustments.

The policy shift coincides with significant industry challenges, including severe overcapacity and falling prices. In the photovoltaic sector, supply currently exceeds global demand by more than 2:1. Major industry players, such as Longi Green Energy and Tongwei, have reported significant pre-tax losses. Regulators are also implementing stricter energy efficiency standards and anti-monopoly measures to force industry consolidation and address low-price dumping practices.