As the Chinese solar manufacturing consolidation and shakeout continues, we get news that the government will step in and offer tax breaks on all solar products. Producers of solar products will receive an immediate 50 percent back in value added taxes.
“China’s bloated photovoltaic industry still faces a grim outlook as many companies are deeply mired in debts,” said a report on the official Xinhua news service discussing the announcement.
It cited data from the China Renewable Energy Society saying that the country’s top 10 solar panel makers are up to 100 billion yuan ($16.34 billion) in debt, with a debt to asset ratio above 70 percent on average.
Beijing has said it wants to consolidate the industry, but the sector continues to enjoy protection at the central and local level; the latter is particularly strong because solar power companies are frequently major employers.
Chinese municipalities and the China Development Bank extended enormous credit lines to manufacturers, the kind of money that makes the half billion given to Solyndra paltry. Still all that debt has to be unwound in an environment of declining solar PV prices. In a couple years we’ll be down to a few powerhouse Chinese solar panel makers, though it’s still hard to see how they will pay back all of their debt as panel prices may stabilize but margins will still be tight.