China has temporarily suspended approvals for new battery storage manufacturing projects, specifically factories producing battery cells, as authorities assess the gap between operating capacity and planned or unfinished facilities. Projects that have not broken ground are frozen, while those already under construction can continue for now. The move comes as China’s energy storage market faces falling prices, intensified competition from solar manufacturers and weaker demand after mandatory renewable-storage co-location rules were relaxed. New energy storage capacity commissioned in the first half of 2026 fell 18% from a year earlier. China also reinstated a 2% consumption tax on lithium-ion batteries on Sept. 1, with the rate scheduled to rise to 4% by September 2027. Demand for grid balancing and backup power remains strong, but the policy reflects Beijing’s broader effort to contain destructive overcapacity and price competition, as it has done in steel, solar panels and electric vehicles.