Beijing, Sep 30 (IANS): In its latest bid to encourage the use of green energy, the Chinese government has announced tax breaks to manufacturers of solar power products.

From Oct 1, 2013 to Dec 31, 2015, vendors of self-produced power products using solar energy will immediately receive refund of the 50 percent of the value-added taxes, reported Xinhua Sunday citing the finance ministry.

The move came as China tries to digest the over-supply of photovoltaic products in the its domestic market after demand from major export destinations -- the European Union and the US -- faltered due to trade rows.

In August-end, China's top economic planner -- the National Development and Reform Commission -- had decided to provide a subsidy of 0.42 yuan (or, about 7 US cents) per kilowatt-hour (KWH) to distributed solar power stations.

Despite the support policies, China's bloated photovoltaic industry still faces a grim outlook as many companies are deeply mired in debts.

The country's top 10 solar panel makers have up to 100 billion yuan (over $16 billion)
in debts and the ratio of debt to assets is above 70 percent in general across the industry, according to China Renewable Energy Society's statistics.

According to analysts, even if the domestic market is expanded, China's production overcapacity cannot be fully digested and some manufacturers must be eliminated, analysts have pointed out.

They expect the industry to see drastic eliminations and accelerated integrations in the coming months.