China has significantly intensified its regulatory oversight of lithium mining, transitioning from a lenient approach to a stringent framework aimed at ensuring sustainable and high-quality growth. In 2023, authorities initiated a policy to ‘clean up’ productive capacity, eliminating unlicensed operators and enforcing stricter compliance standards. This shift culminated in the enactment of a revised Mineral Resources Law in July 2025, which for the first time classified lithium as an independent, strategic mineral, thereby raising entry barriers and centralizing approval authority within the Ministry of Natural Resources (MNR).
Among the key changes, the new framework established a minimum lithium oxide (Li₂O) content of 0.4% for deposits to qualify as lithium orebodies, mandated the reclassification of mines previously registered under other categories, and reinforced environmental and safety standards through ‘green mine’ criteria. The centralization of mining rights approval aimed to curb past issues, such as in Yichun, where local officials had overstepped their jurisdiction.
The lithium industry faced significant challenges in 2023, with prices plummeting nearly 90% due to oversupply and slowing demand. This downturn led to fierce competition and overcapacity, forcing smaller, high-cost mines to operate at a loss. By mid-2025, around 30% of Jiangxi’s lithium-mica capacity remained idle due to negative margins.
In response, policymakers adopted ‘supply-side reform’ strategies, encouraging industry consolidation and curbing excess capacity. Measures included banning below-cost sales, adding lithium to the stabilization list of new energy materials, and coordinating temporary shutdowns in lithium-rich provinces. The Lithium Branch of the China Nonferrous Metals Industry Association also urged the supply chain to resist ‘vicious competition’ and promote healthy development.
The regulatory overhaul highlighted China’s shift from maximizing production volume to prioritizing quality, efficiency, and sustainability. Inspections in Yichun uncovered irregularities, leading to the suspension of non-compliant mines and stricter licensing procedures. This transition has bolstered lithium carbonate prices and fostered expectations of more disciplined supply.
China’s new approach aims to filter speculative or obsolete capacity, reduce domestic oversupply, and establish a technologically advanced production ecosystem. By raising entry barriers and compliance costs, the country seeks to reinforce its global leadership in lithium production on a more robust foundation.