Shares of major solar companies and battery makers in China rose on Monday after the country's government announced a new consumption tax on solar cells and lithium batteries.
The move gave investors confidence that the government is working to reduce the problem of overproduction that has long weighed on the industry, especially the solar sector.
Among the companies that recorded gains were Longi Green Energy and Jinko Solar, while the world's largest battery maker, Contemporary Amperex Technology Co. (CATL), also recorded an increase in share prices.
Investors see the new policy as an effort to create healthier competition in the industry.
According to Beijing's announcement, lithium-ion batteries will be subject to a consumption tax of 2% starting September 2026 before being increased to 4% a year later.
Solar cells will be taxed at 2% starting April 2027 and rising to 4% in April 2028.
Previously, both products had been exempted from the tax since 2015 to accelerate the development of China's clean energy industry.
While the policy has made China a global leader in solar panel and battery manufacturing, it has also caused production to grow too fast, creating a surplus.
As a result, many companies have been forced to compete in price wars that have hurt profits, especially in the solar sector.
Analysts expect large companies like CATL to be better able to absorb the additional costs or pass them on to customers than smaller manufacturers.
At the same time, new technologies such as perovskite solar cells, sodium-ion batteries and solid-state batteries are exempt from taxes until the end of 2028 to encourage innovation.
Overall, the move is seen as an effort by the Chinese government to balance the growth of the clean energy industry by ensuring more controlled production capacity.
In addition to helping stabilize the market, the policy is also expected to increase government tax revenue and strengthen the position of more efficient companies in the long term.
