China has temporarily suspended construction of new projects to manufacture power and energy-storage batteries, pending a year-end review of industry capacity, Caixin reported. Projects already approved or under construction are expected to proceed, while those still in planning stages could be suspended, according to a separate report from Shanghai Securities News. The move comes after regulators twice warned manufacturers earlier in the year to avoid excess capacity growth.

Officials are trying to ensure the sector avoids the fate of China’s solar industry, which dominates global manufacturing but has seen its top companies lose billions of dollars after a rapid build-out of factories outpaced growth in demand and led to vicious price wars. About 100 new battery expansion projects were signed between January and July 2026, with combined annual capacity of about 2,608.5 gigawatt-hours, Caixin reported. That exceeds the 1,755.6 GWh of total output recorded in 2025, according to the report.

Morgan Stanley analysts including Jack Lu expect the crackdown to benefit manufacturers who use most of their capacity. Contemporary Amperex Technology Co. Ltd. had a 95% utilization rate in the first half of this year, the bank said, compared to the industry average of 65%. "If implemented consistently, the policy could accelerate industry consolidation, improve utilization rates, and support a more rational competitive environment across both the EV battery and energy storage markets," Morgan Stanley said.