The Economic Consequences Of Spin-Offs Of New Energy Companies Under The Withdrawal Of Policy Subsidies

The new energy sector is growing rapidly driven by the government,and the government subsidy policy implemented since 2009 has greatly reduced the cost of new energy enterprises and stimulated consumers’ willingness to purchase.However,in 2014,the government issued a draft of the policy subsidies to retreat for comments,and in 2016 the fiscal subsidies for new energy vehicles were formally implemented,so the policy benefits enjoyed by new energy enterprises gradually decreased.The impact of this policy is mainly reflected in the reduction of enterprise funds,increased operating costs,and makes the technical requirements of the new energy industry more and more stringent,and the market competition is more and more intense.Under this circumstance,new energy enterprises have been looking for ways to break through,and in 2019,the SFC issued the "Certain Provisions on Pilot Domestic Listing of Subsidiaries of Listed Companies",which set out the requirements for domestic spin-offs in China,breaking the previous discouragement of spin-off listings.Under this circumstance,many companies have disclosed their intention to spin off their subsidiaries,and new energy companies are no exception.In the context of subsidy withdrawal,can new energy companies solve their difficulties through domestic spin-offs and what are the economic consequences?This paper adopts a case study approach to analyze the impact of the new energy industry in the policy of subsidy withdrawal through typical cases and to explore the short-term effects of divestment.Through reading the relevant policies and literature,this paper finds that up to now,there are few case studies on the divestment under the policy subsidy withdrawal in China,and most of them are empirical studies.This paper analyzes the motivation and economic consequences of Xiamen tungsten’s spin-off from two dimensions: industry as a whole and individual cases,in order to supplement the literature on spin-offs of new energy enterprises under market transformation.It is also hoped that the study of the motivation and economic consequences of Xiamen Tungsten’s spin-off will provide implications for other new energy companies that are about to go public.This paper takes Xiamen Tungsten,which is in the middle and upper reaches of the new energy industry,as a case study.Based on a review of domestic and international literature on policy subsidies and spin-offs,this paper uses the event study method,deductive reasoning method,case study method,and comparative analysis method to analyze the economic consequences of Xiamen Tungsten’s spinoff of Xiamen Tungsten New Energy under the retreat of policy subsidies.The final study found that the spin-off of new energy enterprises can effectively cope with the series of challenges brought by the subsidy withdrawal: the spin-off can alleviate the capital pressure of the parent and subsidiary companies and give them separate financing channels;the spin-off can help the subsidiary companies increase their visibility and easily occupy a favorable position in the market;the spin-off gives the subsidiary companies more autonomy to operate and can improve their own business conditions,etc.By analyzing the case and combining the above findings,this paper proposes the following insights: under the environment of declining policy subsidies,in the face of the gradual shift to market-driven new energy industry,a spin-off is indeed one of the effective ways for new energy companies.The spin-off can bring positive short-term market effects in the A-share market,but when planning a spin-off,we should not only follow the market "spin-off fever",but also base on the overall strategic needs of the company and maximize the common interests of the parent and subsidiary through the spin-off.