China now had 450 million bicycles, nearly two for each household, and output was dropping sharply, the agency said.
New bicycle production projects should be banned, it quoted unnamed experts as saying.
The report attributed the bicycle glut to an influx of foreign-invested companies producing high-quality roadsters and to import barriers imposed by some European countries.
Output of bicycles, which once ruled China's city streets but are now under pressure from a growing numbers of taxis and cars, slumped more than 20 percent in the first half compared with the same period last year, it said, but gave no details.