China issues draft rules to regulate booming lithium battery expansion

China issued draft rules on Wednesday to regulate its lithium battery market, after rapid expansion in the sector hit industry profits and sparked concerns about overcapacity in international market.

The proposals, issued by the Ministry of Industry and Information Technology, are intended to safeguard the healthy development of the lithium battery sector, the ministry said.

The rules would guide lithium battery firms to reduce manufacturing projects that ‘purely’ expand production capacity.

They would also require projects built on farmland and ecological zones to be shut down or put under strict controls and gradually removed.

Rapid expansion of production capacity along the lithium battery supply chain has led to a plunge in prices for products including battery and raw materials, hitting companies’ profits in the world’s biggest market.

US Treasury Secretary Janet Yellen said during her trip to China last month that China is flooding global markets with cheap goods, particularly in the clean energy industries.

China, however, responded by claiming its industries are more competitive, driven by innovation and complete supply chain systems.

(By Siyi Liu, Qiaoyi Li, Judy Hua and Ryan Woo; Editing by Himani Sarkar and Kim Coghill)