China's solar industry is bracing for a potential demand shock as the government plans to eliminate a crucial export-tax rebate. This move, flagged by Longi Green Energy Technology Co., could lead to a whiplash effect on demand patterns, threatening the sector's fragile recovery.

The impending rollback of the rebate comes at a critical juncture for the solar sector, which has been grappling with overcapacity and falling prices. Longi, a leading player, has warned that the sudden removal could disrupt market stability, potentially leading to overproduction and further price erosion.

Investors and businesses are closely watching how this policy shift will impact Longi Green Energy and its peers. The company's warning underscores the sector's vulnerability to policy changes, a concern for investors who have already seen the solar sector's volatile performance.

Looking ahead, analysts predict that the industry may need to adapt by diversifying revenue streams and focusing on higher-margin markets. The outcome will test the resilience of Chinese solar manufacturers in navigating policy uncertainty.