From Oct. 1, 2013, to Dec. 31, 2015, the government will refund manufacturers 50% of value added tax, according to China's state-owned Xinhua news agency.
Chinese firms have been hit hard by market overcapacity, declining demand and international trade disputes with the United States and the European Union, all of which have resulted in mountains of debt for leading Chinese players.
Citing data from the China Renewable Energy Society, Xinhua said the country's top 10 solar panel makers had up to CNY 100 billion ($16.3 billion) in debt, adding that the ratio of debt to assets was "above 70% in general across the industry."
In March, the main operating unit of China's Suntech Power, the world's largest solar panel producer, was forced into bankruptcy due its growing debt and plummeting PV prices. LDK Solar, the worlds biggest solar wafer manufacturer, followed, defaulting on a $7.2 million bond payment in April due to a cash shortage and seeing its German subsidiary, Sunways, declare bankruptcy the following month. LDK continues to struggle
LDK continues to struggle to stay afloat: last week it negotiated a 30-day reprieve over interest payments due on U.S. bond notes.
Some manufacturers to be eliminated from Chinas bloated photovoltaic industry
The Xinhua report offered little consolation to the domestic industry, however. "Despite the support policies, China's bloated photovoltaic industry still faces a grim outlook as many companies are deeply mired in debts," the agency said. Xinhua added that "some manufacturers must be eliminated," pointing out that even if the domestic market were to expand, China cannot fully digest the country's production overcapacity. It predicted that the local industry would see "drastic eliminations and accelerated integrations in the coming months."
News of the rebate program is sure to invite further criticism from U.S. and European rivals, who have long accused Chinese firms of unfairly benefitting from state subsidies that allow them to sell their products at dumping prices.
Chinese state-owned banks have also been instrumental in helping domestic companies secure needed credit lines.
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