China's central government has sent a working group to probe illegal mining in the country's lithium hub Yichun, financial news outlet Yicai reported on Sunday.
Yicai, citing sources, said the probe comes amid a "shutdown and rectification" of lithium producers in Yichun, a small city in southern Jiangxi province known by some as Asia's lithium capital.
News of the probe follows a Yichun local government announcement on Friday that it was cracking down on criminal activity in the lithium battery industry, such as unlicensed and environmentally damaging mining.
Yichun has 1.1 million tons of lithium oxide reserves and accounts for 12% of global output, according to the South China Morning Post.
One lithium analyst, who declined to be named, told Yicai that the industry optimistically estimates that the shutdown will last for about a month.
Yichun currently produces between 10,000 tons and 12,000 tons of lithium carbonate per month, it reported. "If production is suspended for a month, the affected scale may account for about 10% of the global market," the analyst said.
Lithium batteries are a key component in electric vehicles, demand for which has grown rapidly in recent years as climate-conscious consumers snap up cars with electric powertrains amid soaring fuel prices.
Yichun's rich lithium reserves have led to a rapid expansion of the city's mining industry that has brought large tax revenues to the local government.
But the industry has also been plagued by over-mining and under-regulation, leading to environmental issues such as local water sources being polluted with thallium, a toxic metal.
The world's largest battery maker CATL is one of many Chinese conglomerates that own assets in Yichun.
Last December several companies in the city's lithium industry halted production as the local government investigated the water quality of a river that supplies residents.