This paper examines the issue of subsidy reduction in the photovoltaic industry in the People’s Republic of China in mid-2018, including the effects of the reduction and the aftermath of the policy change. This paper also examines the main reasons why the industry bounces back after two years, although the subsidy continues to decline until it is cancelled by 2021. This paper interviewed a number of members of the photovoltaic industry to share their experiences, opinions and observations over this period. Together with data collected from government sources and third-party institutions, it shows that an unexpected policy change would cause the collapse of market confidence and would take large effort to restore. Furthermore, this paper also found that the photovoltaic market has rebounded for various reasons, including technological advances and new government policies. It shows that the photovoltaic industry is strongly influenced by the government's environmental and energy policies. These government policies should help create demand for industry to help support its development. The carbon emissions target set by the Chinese government has made major changes to its energy policy and, as a result, renewable energies such as photovoltaic solar energy are strongly promoted. Finally, the Chinese government also supplemented its environmental policies with demand-driven policies using its extensive network of public facilities and state-owned enterprises.