China cuts VAT export rebates to curb battery price dumping and trade frictions
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China will abolish VAT export rebates for photovoltaic (PV) battery products from 1 April 2026 and phase out battery rebates by January 2027.
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The policy aims to reduce aggressive export price discounting, stabilise overseas market pricing, and mitigate the risk of trade retaliation.
- But immediate effect has been to raise the price of lithium, a key component of the products, as producers rush to export to beat the withdrawal of the tax break in April.
China has announced a significant shift in its export tax policy, cancelling value added tax (VAT) export rebates for photovoltaic products and progressively reducing rebates for battery products. The decision reflects Beijing’s growing concern that excessive price discounting by exporters is fuelling global market distortions and heightening the risk of retaliatory trade measures from key trading partners.
Under a joint statement issued by the Ministry of Finance and the State Taxation Administration, VAT export rebates for photovoltaic products will be scrapped entirely from 1 April 2026. For battery products, the rebate rate will be reduced from 9% to 6% between April and December 2026, before being eliminated altogether from 1 January 2027. Consumption tax rebate rules for these products will remain unchanged.
VAT credits tool for pricing manipulation
China has become the dominant global supplier of solar panels and batteries, supported by scale efficiencies, industrial policy support, and historically generous export rebate mechanisms. These rebates effectively reduced exporters’ tax costs and, in some cases, were passed directly to overseas buyers as price discounts.
Industry bodies have acknowledged that this dynamic has contributed to sharp declines in export prices, intensifying competition in foreign markets. The China Photovoltaic Industry Association stated that some exporters were using VAT rebates as a tool to discount prices abroad, accelerating deflationary pricing trends. By withdrawing rebates, authorities intend to encourage a more rational pricing environment and reduce the likelihood of trade disputes.
This move builds on earlier measures. In December 2024, China already reduced the export rebate rate for photovoltaic products from 13% to 9% as part of broader efforts to rein in overcapacity, stabilise domestic profitability, and reduce international trade tensions. The latest announcement represents a more decisive escalation.
