(Yicai) Nov. 18 -- The lower tax relief on certain exports that the Chinese government revealed at the end of last week is expected to put further pressure on the country’s photovoltaic companies, according to industry insiders.

China will trim the export tax rebate on some refined oil, solar, and non-metallic mineral products, as well as batteries to 9 percent from 13 percent on Dec. 1, the Ministry of Finance and State Taxation Administration jointly announced on Nov. 15. It will also cancel export tax relief on aluminum and copper products and chemically modified animal, plant or microbial oils and fats.

Intense competition will make it hard for PV companies to fully offset the increased cost through price hikes, further narrowing profit margins, the sources said, adding that those with weaker technological capabilities, inefficient production processes, and poor cost control may struggle to survive.

“The move is expected to increase the overall PV production costs and affect the downstream segment as well,” an insider at one solar company told Yicai. “Firms will need to become more self-reliant to survive.”

But the Shanghai Metals Market said the overhaul of the export tax system will have a limited impact on production at Chinese PV companies, and may actually spur their overseas sales, helping to steady and even boost prices, especially in those markets with surging demand and supply shortages that rely on imports of Chinese components.

Markets such as Europe and the United States, which have high solar panel inventories, have invested heavily in building local supply chains, which means that their dependence on Chinese PV products is gradually decreasing, said Wang Wenqi, an analyst at the SMM. So these markets may prioritize clearing inventories rather than importing from China.

The export tax rebate system has been in place since 1985. It was introduced to refund the indirect taxes paid on the production and distribution of export goods, enabling them to enter overseas markets tax-free and enhance their competitiveness. Solar products were included in 2003.

Last year, Chinese PV makers exported 70.3 gigawatts of silicon wafers, 39.3 GW of solar cells, and 211.7 GW of PV modules, accounting for more than 80 percent of the global market, according to data from the International Energy Agency.

Editor: Futura Costaglione