China has put a temporary stop to the construction of new power and energy-storage battery projects, including those for electric vehicles, as it conducts a review of existing production capacity. This pause, reported by Caixin Global on September 10, 2026, is part of a broader effort to address overcapacity and steer the lithium-ion battery industry toward higher-quality development, moving away from a "scale-first" approach that has led to intense competition and falling prices.
The regulatory action follows a significant surge in battery production. In the first seven months of 2026, China's lithium battery industry saw approximately 100 new expansion projects announced, with a designed annual production capacity totaling about 2,608.52 GWh. This figure is roughly 1.5 times the entire output from the previous year, highlighting the rapid expansion that has outpaced demand and led to concerns about market sustainability. Officials had initiated a comprehensive assessment of power and energy-storage battery capacity and utilization rates by late 2025.
The suspension specifically targets projects that had not secured necessary environmental and energy assessment approvals by mid-May 2026. Projects that had already obtained these permits are not affected. Authorities plan to evaluate battery manufacturers based on their capacity utilization rates by the end of 2026. Only companies demonstrating high utilization will be granted approval for future battery projects, indicating a shift towards prioritizing efficient and established producers. This move mirrors previous rationalization efforts, such as the introduction of a consumption tax on lithium-ion batteries and solar cells, to curb irrational expansion and promote sustainable growth.
This policy intervention by the Chinese government, which comes amid a "deepening anti-involution" campaign within the lithium-ion sector, aims to prevent a repeat of oversupply issues seen in other manufacturing sectors like solar panels and electric vehicles. The goal is to ensure the long-term health and competitiveness of China's dominant battery industry, which currently accounts for over 80% of global lithium-ion battery shipments.
