Takehome: China MIIT issued the revised Regulatory Standards for the Lithium-ion Battery Industry and the Interim Administrative Measures for the Regulatory Circular of the Lithium-ion Battery Industry.
On January 16, the Chinese Ministry of Industry and Information Technology issued the Regulatory Standards for the Lithium-ion Battery Industry (2018) and the Interim Administrative Measures for the Regulatory Circular of the Lithium Ion Battery Industry (2018) after consulting on revisions to previous versions.
The revised regulations, effective from February 15, 2019, aim to further enhance the administration of the lithium-ion battery industry and facilitate its transformation and upgrading.
More Stringent Environmental Protection Requirements
The Regulatory Standards explicitly provides that it should be prohibited to construct lithium-ion battery projects or any supporting facilities in natural reserves, reserves for drinking water sources or ecological reserves determined by national laws and regulations or approved by governments at the provincial level or above, on the designated permanent basic croplands, or in areas where the construction of industrial enterprises is prohibited by the law.
Lithium-ion battery enterprises which are currently located in the areas described above should be shut down and removed, or control their sizes and gradually move out of such areas.
In addition, enterprises are encouraged to build up a “green supply chain” as well as implementing resource conservation and construction of an environmentally friendly system which involves all links in the supply chain.
Higher Standards for Capacity and Quality Control
According to the Regulatory Standards, new lithium-ion battery projects and their supporting facilities which feature larger capacities yet little technological advancement must be put under strict control. Industry regulators and authorities shall, in line with relevant regulations, conduct discussions on and assessments of new projects or expanded projects which can promote technological innovations and improve product quality.
Enterprises whose production in the previous year came in below 50% of its capacity are not qualified to apply for expanding capacity. This is set to help improve the capacity utilization rates across the sector.
The Regulatory Standards requires that lithium-ion battery enterprises and associated businesses should be capable of product quality inspections. It also encourages enterprises to establish a robust product traceability system based on third-party certification.
Greater Emphasis on Technological Innovations
The Regulatory Standards provides that lithium-ion battery enterprises are required to spend no less than 3% of its operating revenue on research and development. Enterprises are encouraged to obtain the qualification of new high-tech enterprises or R&D institutes or technology centers at or above the provincial level.
Such quantitative requirements are expected to prompt enterprises to improve their core competitiveness by pursuing technological advances and optimizing their capacity structure.
Better-regulated Procedure of Industry Administration
The Interim Administrative Measures details how eligible enterprises should apply to relevant authorities so as to be included in the regulatory circular which lists all enterprises compliant with regulatory standards. Moreover, in order to ensure the continued compliance of certified enterprises, such enterprises are required to submit their annual self-examination report for the previous year through the MIIT public service platform for the lithium-ion battery industry (www.ldchy.cn) before March 31 each year, report their operations data semiannually, and file the paper versions of their self-examination report to MIIT.
Moreover, MIIT would organize or commission third-party inspection institutes to conduct random testing of products produced by enterprises listed in the regulatory circular, and those failing to pass the testing will be subject to corresponding punishments.