China's Lithium Mining Faces Strict New Regulatory Era

In response, policymakers pivoted to“supply-side reform”: encouraging consolidation, cutting excess capacity, and avoiding a race to the bottom. By mid-2025, the state planner and several ministries were using the term“反内卷” (anti-involution) for lithium and batteries-i.e., ending redundant, destructive competition. Notable measures included:

• June 2025: an amendment to the unfair-competition framework banning below-cost sales, curbing price wars in batteries and materials.
• July 2025: the MIIT added new energy materials (including lithium) to its stabilization list and instructed companies to avoid“disorderly low-price competition.”
• Coordinated local cuts: in lithium-rich provinces, local governments synchronized temporary shutdowns to ease overcapacity (e.g., guidance to Zangge in Qinghai to pause production temporarily).

The aim is to prevent the market from being flooded with output and triggering boom-and-bust cycles that threaten long-term sector health. In August 2025, the Lithium Branch of the China Nonferrous Metals Industry Association urged the entire supply chain to“resist vicious competition” and promote healthy development.

In short, the emphasis is no longer on maximizing volume at all costs, but on controlled, high-quality growth-even if that means shutting higher-cost or non-compliant operations.

In early 2023, Yichun came under intense scrutiny as communities and small operators engaged in widespread, unauthorized lithium extraction. This caused environmental damage and transport accidents, prompting central authorities to step in.

Regulators ordered the full shutdown of unauthorized or non-compliant mines and concentrators, while operations holding valid permits generally resumed within days or weeks. The crackdown helped restore order but exposed systemic regulatory weaknesses in one of the world's fastest-growing lithium hubs.

By mid-2025, China had overhauled its mining framework, classifying lithium as strategic and tightening licensing procedures. In July, the Yichun Natural Resources Bureau publicly flagged eight mines for licensing inconsistencies (mismatches between the permitted mineral category and actual lithium extraction) and required updated reserve reports.

On August 9, 2025, CATL's Jianxiawo mine (Yichun, China) suspended operations due to permit expiry amid a regional audit that identified irregularities at seven other mines. The underlying practice was common: producing lithium from properties registered as clay. As a first step, operators must rectify their permits and then submit renewal applications to the MNR.

The renewal process could take 3–6 months, depending on prioritization given CATL's prominence in the battery and EV supply chain. In an adverse scenario with technical or environmental observations, delays should not exceed roughly three additional months.

In recent years, China's lithium mining has moved from a“produce at all costs” approach to a more strategic model aligned with international standards and long-term competitiveness.

The suspensions in Yichun and inspections that uncovered irregularities illustrate this shift: the priority is not volume maximization, but industry clean-up and technological upgrading.

The roll-out of the revised Mineral Resources Law and anti-involution policies marks a transition from unchecked capacity expansion to a model based on quality, efficiency, and sustainability.

On the economic front, markets have reacted strongly to these adjustment signals: regulatory pressure and targeted shutdowns have buoyed lithium carbonate prices and fostered expectations of more disciplined supply.

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The CNMIA's call to avoid unfair competition and promote high-quality development confirms that the industry is entering a new phase of sectoral governance. By raising entry barriers and compliance costs, China is filtering speculative or obsolete capacity, reducing domestic oversupply, and reconfiguring the production ecosystem toward higher standards.

This process not only reinforces China's role as a global lithium leader but also seeks to anchor that leadership on more robust, technologically advanced foundations.

Pablo Faúndez is practice leader, Environment & Society, GEM Mining Consulting. He is an industrial engineer from the Pontificia Universidad Católica de Chile (PUC), where he also completed a graduate diploma in transportation and a master's degree in public policy.

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