This is a document about China’s decision to reduce export tax rebates. It discusses the impact of this policy change on various industries, including aluminum, copper, photovoltaics, and lithium batteries. The document also highlights the potential long-term implications of this shift in tax policy, which may involve redirecting subsidies from overseas consumers to domestic consumers.
On November 15, 2024, the Ministry of Finance and the State Taxation Administration jointly issued an Announcement on Adjustments to Export Tax Rebate Policies.
Specific adjustments include:
- Cancellation of export tax rebates:Export tax rebates for aluminum materials, copper materials, and chemically modified animal, plant, or microbial oils and fats will be canceled.
- Reduction of export tax rebate rates:The export tax rebate rate for certain finished oils, photovoltaic products, batteries, and non-metallic mineral products will be reduced from 13% to 9%.
- Effective date:These adjustments will take effect from December 1, 2024.
This is a document about China’s decision to reduce export tax rebates. It discusses the impact of this policy change on various industries, including aluminum, copper, photovoltaics, and lithium batteries. The document also highlights the potential long-term implications of this shift in tax policy, which may involve redirecting subsidies from overseas consumers to domestic consumers.
From an industry impact perspective, the analysis suggests that the tax adjustment will have a greater impact on aluminum than copper, potentially leading to a short-term decline in the domestic-to-international price ratio for aluminum. The reduction in solar photovoltaic export tax rebates is expected to alleviate “involutive” exports, while lithium batteries, even if prices rise due to reduced rebates, are still likely to maintain a price advantage in overseas markets.
However, the deeper implications behind these policy changes are more noteworthy. The analysis points out that export tax rebates for multiple industries are being phased out, suggesting a potential shift in fiscal subsidy policies from subsidizing overseas consumers to subsidizing domestic consumers. This shift represents a long-term and profound investment opportunity.
The reduction in solar PV export tax rebates is expected to mitigate “involutive” exports. The PV products affected by this adjustment include silicon wafers, cells, and modules. According to the General Administration of Customs, China exported a total of $26.357 billion worth of these primary PV materials in the first three quarters of this year. After the adjustment of the rebate rate, the export tax rebate for these PV products will decrease by $10.54 billion.
Guo Yanchen, an analyst at Founder Securities, believes that the reduction in export tax rebates will likely push up the costs of exported batteries and modules, leading to price increases. With the industry chain facing losses, the burden of the rebate rate reduction from 13% to 9% can only be borne by downstream companies. Assuming an export module price of $0.75/watt, the price needs to increase by $0.02-0.03/watt to offset the impact.
In the long term, the government may shift its fiscal subsidy policy from subsidizing overseas consumers to subsidizing domestic consumers, creating long-term and deep investment opportunities.
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