China's exports of solar cells and panels declined in July, marking the third consecutive month of contraction following the removal of the country's export tax rebate as of April 1.

China's solar equipment exports fell 21.4% in July from a year earlier, according to Chinese customs data cited by Reuters on Tuesday.

The world's top manufacturer of solar panels and cells scrapped export tax rebates on the value-added tax (VAT) for photovoltaic products, including solar cells and panels, effective April 1, 2026. The rebate rate stood at 13% before its cancellation, and Chinese producers account for more than 80% of global capacity across all key stages of the solar supply chain, according to the International Energy Agency — scale that gives the tax decision significance for solar equipment costs well beyond China's borders. China will also withdraw the export tax rebate on battery products, effective January 1, 2027.

The move was welcomed by China's domestic solar manufacturing industry, which has spent recent years battling overcapacity and a price war that drove module prices to record lows and compressed margins across the sector. The China Photovoltaic Industry Association has said the measure would help restore "rational pricing in foreign markets and reduce the risk of trade frictions for China." Those frictions are well established: both the United States and the European Union have imposed duties on Chinese solar products over the past decade.

The tax policy change was widely expected to slow solar exports from April 2026 onwards, as the policy raises export costs and makes Chinese PV products more expensive in international markets.

Ahead of the April 1 deadline, China's solar exports surged in March amid soaring demand for clean energy in South and Southeast Asia, where the oil supply shock at the Strait of Hormuz drove increased solar power installations. Chinese solar exports hit a record high of 68 gigawatts (GW) in March, double the February export volumes, due to the spike in energy prices and an additional boost from the changes to Chinese tax rebates, according to data analyzed by Ember in April.

Despite the decline in Chinese solar exports since May, shipments to Africa, Southeast Asia, and South Asia have continued to grow this summer amid high demand in these markets. In June, total Chinese solar exports fell 9% from a year earlier, but shipments to Southeast Asia jumped 33%, exports to Africa surged 26%, and exports to South Asia increased 12%.

Meanwhile, exports to Europe, China's top market, fell 18%, and exports to the Middle East crashed 38% in June.

How the contraction evolves from here — and whether demand growth in Africa, South Asia, and Southeast Asia continues alongside the pullbacks in Europe and the Middle East — will show up in the monthly customs releases, with the extension of the rebate withdrawal to battery products on January 1, 2027, marking the policy's next milestone for China's clean-technology exports.

By Charles Kennedy for Oilprice.com