Iota Silicone Oil (Anhui) Co., Ltd
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In a major policy shift, the Chinese government announced the elimination of the 13% VAT export rebate for primary-form polysiloxane, including hydrogen silicone oil, effective April 1, 2026.
What Changed
According to a joint announcement by the Ministry of Finance and the State Taxation Administration, the export rebate cancellation covers a wide range of silicone products, including 107 rubber, 110 rubber, methyl silicone oil, vinyl silicone oil, and hydrogen silicone oil. The new policy applies to all export shipments declared on or after April 1, 2026.
Short-term Volatility
In the immediate aftermath, the industry experienced a "rush export" phenomenon as exporters scrambled to ship products before the deadline. This has strained domestic supply in Q1 2026.
However, analysts predict a sharp correction in Q2 2026. The direct increase in export costs—approximately USD 220 per ton for standard products—will either squeeze margins or be passed on to overseas buyers, potentially reducing Chinese competitiveness in the short term.
Long-term Benefits
Despite the short-term pain, the policy is viewed as a long-term positive for the industry:
Accelerating the Exit of Low-end Capacity: Companies that relied solely on rebates for profitability will be forced to exit, consolidating the market.
Encouraging Innovation: With the cost advantage erased, manufacturers are compelled to shift toward high-value specialty products—high-hydrogen-content fluids, electronic-grade materials, and medical-grade silicones.
Strengthening Pricing Power: China currently accounts for over 70% of global silicone production capacity. Overseas buyers have few alternatives, giving Chinese suppliers some leverage to renegotiate pricing.
Industry Response
Leading manufacturers are responding by:
Improving production efficiency to reduce costs
Expanding domestic sales channels
Focusing on high-margin technical grades rather than commodity products
The policy essentially signals the end of China's role as a low-cost commodity supplier and the beginning of its emergence as a technology-driven material science powerhouse.
