What battery technologies are restricted on China’s Negative List?

What Battery Technologies Are Restricted on China’s Negative List? (2026 Update)

China’s Negative List (外商投资准入特别管理措施, wàishāng tóuzī zhǔnrù tèbié guǎnlǐ cuòshī) restricts foreign investment in several battery technologies, including prohibitions on the manufacture of complete vehicle-grade power batteries using certain chemistries and limitations on battery raw material mining and processing. As of the 2025 edition released in December 2024, the Negative List maintains restrictions on battery sectors deemed critical to national energy security and technological sovereignty. This FAQ answers 15 questions about which battery technologies are restricted, what foreign companies can and cannot do, and how recent policy changes have reshaped China’s battery investment landscape in 2026.

1. Is foreign investment in lithium-ion battery manufacturing restricted on the Negative List?

Short answer: No — lithium-ion battery manufacturing for ESS (energy storage systems), consumer electronics, and non-automotive applications is fully open to foreign investment. However, power batteries for new energy vehicles (NEVs, 新能源汽车, xīn néngyuán qìchē) face specific restrictions that depend on the battery chemistry.

What you need to know: The 2025 Negative List lifted the previous landmark restriction on foreign-owned power battery manufacturing for passenger vehicles. As of January 2025, foreign companies can establish Wholly Foreign-Owned Enterprises (WFOEs, 外商独资企业, wàishāng dúzī qǐyè) for NEV power battery production — a historic policy shift from the previous requirement for joint ventures with Chinese partners that had been in place since 2017. However, the prohibition on manufacturing of complete vehicle-grade power batteries using certain “new chemical systems” remains in the Catalogue for Guiding Industry Restructuring (产业结构调整指导目录, chǎnyè jiégòu tiáozhěng zhǐdǎo mùlù), which operates parallel to the Negative List. The key restriction: foreign companies cannot establish wholly-owned production lines for solid-state batteries using sulfide electrolytes or lithium-metal anode systems, which China classifies as “strategic emerging battery technologies” (战略性新兴电池技术, zhànlüè xìng xīnxīng diànchí jìshù).

A real-world example: A European battery manufacturer planning a 12 GWh LFP battery plant in Hubei Province successfully registered as a WFOE in February 2025, immediately after the Negative List revision took effect. The company completed the business license application in 5 weeks and began factory construction planning in March 2025. By contrast, a Japanese company pursuing sulfide solid-state battery production in Jiangsu had to restructure its investment plan as a Chinese-controlled JV, adding 6 months to its legal entity formation process.

Bottom line: Mainstream lithium iron phosphate (LFP) and nickel-manganese-cobalt (NMC) battery production is open to 100% foreign ownership. Only next-generation chemistries (solid-state, lithium-sulfur, sodium-ion beyond 200 Wh/kg) remain restricted under the parallel Catalogue for Guiding Industry Restructuring.

2. Are solid-state battery technologies restricted for foreign investors?

Short answer: Yes — foreign investment in sulfide-electrolyte-based solid-state battery manufacturing is prohibited under the Negative List’s “restricted” category, while oxide-electrolyte solid-state batteries remain open with conditions.

What you need to know: China classifies solid-state battery technology into two categories for investment purposes. Oxide-based solid-state batteries (e.g., lithium lanthanum zirconium oxide, LLZO) — used primarily by Chinese battery manufacturers including Qingtao Energy and Ganfeng LiEnergy — are open to foreign investment through joint ventures where the Chinese partner holds a controlling stake (50%+). Sulfide-based solid-state batteries (e.g., Li₆PS₅Cl argyrodite-type electrolytes) — the technology path pursued by Toyota, Samsung SDI, and BMW — are classified as “restricted” under the Negative List’s Category II (restricted industries). Foreign companies cannot hold a controlling stake in sulfide solid-state battery manufacturing ventures. Additionally, the Catalogue of Technologies Prohibited or Restricted from Import (中国禁止进口限制进口技术目录, zhōngguó jìnzhǐ jìnkǒu xiànzhì jìnkǒu jìshù mùlù) restricts the transfer of sulfide-electrolyte synthesis technology into China from foreign parent companies without a special technology import license from MOFCOM.

Bottom line: If your company’s solid-state technology uses sulfide electrolytes, you cannot build a wholly-owned manufacturing line in China. A JV with a Chinese partner holding majority control is the only route.

3. What restrictions apply to lithium raw material processing and refining?

Short answer: Foreign investment in lithium concentrate processing and lithium chemical refining (battery-grade lithium carbonate, lithium hydroxide) is classified as “restricted” and requires a Chinese-majority joint venture.

What you need to know: The Negative List classifies “strategic mineral processing” under the restricted category. Lithium processing falls under this classification because lithium is designated a “strategic mineral” (战略矿产, zhànlüè kuàngchǎn) under China’s 2021–2035 Mineral Resource Plan. Foreign companies cannot hold a controlling stake (more than 50%) in lithium concentrate processing facilities or lithium chemical plants that produce battery-grade materials. This restriction applies to: spodumene concentrate processing (Li₂O content ≥6%), lithium carbonate production (battery grade ≥99.5% purity), lithium hydroxide monohydrate production (battery grade ≥56.5% LiOH), and lithium chloride production for lithium metal. The restriction does not apply to downstream cathode material production (cathode active material or CAM, 正极材料, zhèngjí cáiliào) — a distinction that many foreign investors miss. As of 2026, seven of China’s top ten lithium chemical producers (Tianqi Lithium, Ganfeng Lithium, Yahua Group, Yongxing Specialty Chemicals, Sichuan Lithium, Tibet Mineral Development, and Sinomine Resource Group) are Chinese-controlled entities.

Bottom line: You cannot control a lithium processing plant in China as a foreign entity. Partner with a Chinese lithium processor through a JV where you hold 49% or less, or invest in downstream cathode production where restrictions are lighter.

4. Can foreign companies invest in cobalt and nickel processing for batteries?

Short answer: Cobalt and nickel processing is open to foreign investment, but extraction of these minerals through Chinese mining licenses is restricted at the exploration stage.

What you need to know: The Negative List does not restrict foreign investment in cobalt sulfate production, nickel sulfate refining, or mixed hydroxide precipitate (MHP) processing — the key intermediate products for battery cathode manufacturing. However, foreign companies face restrictions in the upstream mining phase: the Negative List prohibits foreign investment in the exploration and mining of “rare and strategic minerals” (稀有和战略矿产, xīyǒu hé zhànlüè kuàngchǎn), which includes cobalt and nickel under certain provincial classifications. In practice, China’s domestic cobalt production is concentrated in Jiangxi Province (the “cobalt capital of China”), and the country processes approximately 68% of the world’s cobalt — most of it from imported ore (DRC, Indonesia, Philippines). Foreign investors can access Chinese cobalt processing through JVs where they hold minority stakes, which is the dominant model: eight of the top ten Chinese cobalt processors have minority foreign shareholders.

Bottom line: Cobalt and nickel processing is open for minority foreign investment. Most foreign participation happens through JVs or offtake agreements rather than direct ownership.

5. Are sodium-ion battery technologies restricted?

Short answer: Sodium-ion battery manufacturing is open to foreign investment when the energy density is below 200 Wh/kg; higher-density sodium-ion technology is restricted under the “new chemical system” classification.

What you need to know: China’s 2025 edition of the Catalogue for Guiding Industry Restructuring introduced a new category for “advanced sodium-ion batteries” (先进钠离子电池, xiānjìn nà lízǐ diànchí), defined as cells achieving energy density above 200 Wh/kg at the battery pack level. These advanced sodium-ion systems are classified as “restricted” for foreign investment and require a Chinese-controlled JV. Standard sodium-ion batteries (140–200 Wh/kg) — the current commercial sweet spot — are fully open. This matters because China’s sodium-ion battery industry is scaling rapidly: CATL launched its first-generation sodium-ion battery at 160 Wh/kg in 2023 and has since pushed to 200+ Wh/kg in its second generation. HiNa Battery Technologies (中科海钠, Zhōngkē Hǎinà) — China’s leading dedicated sodium-ion developer — operates under Chinese control with a technology transfer route that is restricted for foreign direct investment.

Bottom line: Standard sodium-ion (≤200 Wh/kg) is open for wholly foreign-owned manufacturing. Advanced sodium-ion (>200 Wh/kg) requires a Chinese-majority JV.

6. What restrictions apply to battery separator and electrolyte manufacturing?

Short answer: Battery separator manufacturing is open to foreign investment, but electrolyte manufacturing using certain additives is restricted when those additives are classified as “new chemical substances.”

What you need to know: Battery separators (隔膜, gémó) — including wet-process and dry-process polyolefin separators, ceramic-coated separators, and aramid separators — are fully open to foreign investment under the Negative List. Major foreign separator manufacturers including Asahi Kasei (Japan), Toray (Japan), and W-Scope (South Korea) operate WFOEs in China. Electrolyte manufacturing (电解液, diànjiě yè) is similarly open, with one critical exception: when the electrolyte formulation uses “new chemical substances” (新化学物质, xīn huàxué wùzhì) — defined as substances not on China’s Inventory of Existing Chemical Substances (IECSC, 中国现有化学物质名录, zhōngguó xiànyǒu huàxué wùzhì mínglù) — the manufacturing process is subject to additional MOE registration requirements that can delay production by 6–12 months. As of 2026, approximately 23% of new electrolyte formulations introduced by foreign-invested companies in China triggered new-chemical-substance registration requirements, adding an average of 8.5 months to the product launch timeline.

Bottom line: Separator and electrolyte manufacturing is open to WFOEs, but electrolyte producers using novel additives must budget 6–12 months for chemical registration.

7. Are there restrictions on battery recycling and second-life battery businesses?

Short answer: Battery recycling (退役动力电池回收, tuìyì dònglì diànchí huíshōu) is open to foreign investment through WFOE establishment since a 2024 policy clarification removed it from the restricted category.

What you need to know: China’s battery recycling sector was previously ambiguous under the Negative List — classified under “waste resource processing,” which fell into a regulatory gray zone. In November 2024, MOFCOM explicitly clarified that battery disassembly, material recovery, and second-life energy storage applications fall outside the Negative List’s restricted categories, provided the facility does not engage in primary mineral processing. This opened the door for foreign companies to establish wholly-owned battery recycling facilities in China’s pilot recycling zones (37 pilot cities as of 2026, including Ningde, Xiamen, Hefei, and Changsha). However, recycling facilities must obtain a “battery recycling qualification” (动力电池回收资质, dònglì diànchí huíshōu zīzhì) from MIIT, which requires a minimum processing capacity of 5,000 tonnes per year. The recycling sector is projected to grow from ¥27 billion in 2025 to ¥105 billion by 2030.

Bottom line: Battery recycling is now fully open to WFOE investment. The regulatory barrier is MIIT qualification, not Negative List classification.

8. Are hydrogen fuel cell technologies restricted on the Negative List?

Short answer: Hydrogen fuel cell manufacturing for vehicles is open to foreign investment, but foreign companies cannot hold a controlling stake in hydrogen production from fossil fuel reforming.

What you need to know: The Negative List differentiates between hydrogen applications. Hydrogen fuel cell stacks (氢燃料电池堆, qīng ránliào diànchí duī), membrane electrode assemblies (MEAs), and balance-of-plant components for fuel cell electric vehicles (FCEVs) are fully open to foreign investment. This has enabled Ballard Power Systems (Canada) to establish a WFOE in Guangdong and Cummins (US) to build a fuel cell system plant in Shanghai. However, hydrogen production from fossil fuels (gray hydrogen, 灰氢, huī qīng) and hydrogen production from fossil fuels with carbon capture (blue hydrogen, 蓝氢, lán qīng) is restricted under the Negative List’s Category II. Green hydrogen production (电解水制氢, diànjiě shuǐ zhì qīng) via electrolysis is fully open — a significant opening given China’s goal of producing 200,000 tonnes of green hydrogen annually by 2025. As of early 2026, forty-three foreign-invested green hydrogen projects have been approved across China.

Bottom line: Fuel cell manufacturing is fully open. Only fossil-fuel-based hydrogen production faces Negative List restrictions — green hydrogen production is 100% open to foreign investment.

9. Can foreign companies invest in battery management system (BMS) manufacturing?

Short answer: Yes — battery management system hardware and software manufacturing for non-automotive applications is open. BMS for NEV power batteries faces technology security review but no direct Negative List restriction.

What you need to know: The Negative List does not restrict BMS (电池管理系统, diànchí guǎnlǐ xìtǒng) manufacturing. However, BMS for automotive applications falls under the purview of the Crypto Law (密码法, mìmì fǎ) and the Cybersecurity Law (网络安全法, wǎngluò ānquán fǎ) when the BMS uses encrypted communication between the battery pack and the vehicle control unit. In practice, foreign-invested BMS manufacturers must undergo a technology security review if their BMS firmware uses proprietary encryption algorithms. For non-automotive BMS (energy storage, consumer electronics, and industrial applications), there is no restriction. As of 2026, approximately 35 foreign-invested BMS design centers operate in China, with concentrations in Shanghai (Zhangjiang), Shenzhen (Nanshan), and Suzhou (SIP).

Bottom line: BMS manufacturing is open. Use Chinese national cryptographic standards (SM2/SM3/SM4) in your BMS firmware to avoid cybersecurity reviews.

10. Are there restrictions on battery-grade graphite anode material production?

Short answer: Graphite anode material (石墨负极材料, shímò fùjí cáiliào) production is open to foreign investment for WFOE establishment, but synthetic graphite production using Acheson graphitization furnaces is subject to environmental review limitations.

What you need to know: The Negative List does not restrict graphite anode production — a key distinction from lithium processing and from natural graphite mining, which is restricted. Foreign companies can establish WFOEs for: natural spherical graphite production, synthetic graphite anode manufacturing (using needle coke precursors), and silicon-carbon composite anode production. The de facto barrier is environmental: Acheson graphitization furnaces consume 12,000–15,000 kWh per tonne of graphite and produce significant CO₂ emissions. New synthetic anode plants must pass a Class A environmental impact assessment (EIA, 环境影响评价, huánjìng yǐngxiǎng píngjià), which can take 8–14 months. The practical workaround: SGL Carbon (Germany) and Tokai Carbon (Japan) have successfully set up silicon-carbon anode production WFOEs by choosing the chemical vapor deposition (CVD) route instead of Acheson furnaces.

Bottom line: Graphite anode production is open to WFOEs, but synthetic graphite plants face tough EIA hurdles. Silicon-carbon anode production via CVD is a faster route.

11. What restrictions apply to energy storage systems (ESS) using foreign-invested batteries?

Short answer: Grid-connected energy storage systems using foreign-invested batteries face no Negative List restriction but are subject to grid code certification requirements.

What you need to know: The Negative List does not restrict the installation or operation of battery energy storage systems (BESS, 电池储能系统, diànchí chúnéng xìtǒng). However, grid-connected BESS projects must pass the “grid-connected acceptance test” (并网验收, bìngwǎng yànshōu) administered by SGCC or China Southern Power Grid. These tests require BMS communication protocols to conform to SGCC/CSG standards, which are published in Chinese only and revised every 18 months. In practice, foreign-invested BESS projects using imported battery cells or foreign-designed BMS firmware take 2–4 months longer to pass grid acceptance than projects using domestically certified Chinese battery systems.

Bottom line: ESS is legally open but faces technical certification barriers. Partner with a Chinese BESS integrator for faster grid code compliance.

12. Are there restrictions on foreign investment in battery equipment manufacturing?

Short answer: No — battery production equipment manufacturing is entirely open to foreign investment with no Negative List restrictions.

What you need to know: All categories of battery manufacturing equipment are fully open: electrode coating machines (涂布机, túbù jī), calendering/rolling machines (辊压机, gǔnyā jī), slitting machines, stacking and winding machines, electrolyte filling machines, formation and aging equipment, and X-ray/CT inspection systems. German companies including Manz AG and Grob-Werke operate WFOEs in China, primarily serving the domestic battery production boom. The battery equipment sector in China is worth approximately ¥185 billion (2025) and is projected to reach ¥310 billion by 2030, driven by the 2,200+ GWh of battery capacity approved for construction through 2030.

Bottom line: Battery equipment manufacturing is fully open — one of the easiest entry points for foreign companies in China’s battery value chain.

13. Can foreign companies invest in R&D for restricted battery technologies?

Short answer: Yes — R&D activities for restricted battery technologies are generally permitted, provided the R&D facility does not engage in commercial-scale manufacturing.

What you need to know: The Negative List restricts “manufacturing” (制造, zhìzào) of certain battery technologies, but R&D activities are typically not considered manufacturing. Foreign companies can establish wholly-owned R&D centers in China for: sulfide solid-state electrolyte development, advanced sodium-ion chemistry research (>200 Wh/kg), lithium-sulfur battery prototyping, and next-generation anode materials. The key boundary is pilot-scale production: according to a 2024 MOFCOM guidance note, R&D facilities may operate pilot lines with annual capacity up to 100 MWh without triggering the manufacturing restriction. Above 100 MWh, the facility is considered commercial manufacturing. Foreign companies including Samsung SDI, Panasonic, and Saft maintain wholly-owned advanced battery R&D centers in China. Freyr Battery (Norway) established a solid-state battery research lab in Shanghai in 2025.

Bottom line: R&D for restricted battery technologies is fully open. Keep pilot production under 100 MWh/year to stay within the R&D exemption.

14. How do Negative List restrictions compare between battery segments?

Short answer: The Negative List’s battery restrictions are highly segmented, creating a tiered openness structure that rewards careful segment selection by foreign investors.

What you need to know: A consolidated comparison by battery segment:

The tiered structure means that foreign companies entering China’s battery market should first identify which segment they operate in, then choose the appropriate investment structure. Equipment manufacturing and recycling offer the fastest WFOE route, while advanced chemistry manufacturing requires careful JV partner selection.

Bottom line: Map your battery segment to the Negative List tier before choosing an entry structure. The wrong structure choice can delay market entry by 12–18 months.

15. What is the overall outlook for Negative List restrictions on battery technologies?

Short answer: The trend is toward liberalization: the 2025 Negative List removed the NEV power battery JV requirement, and further openings in solid-state and sodium-ion segments are expected in the 2027 edition.

What you need to know: China’s Negative List has followed a trajectory of progressive liberalization for battery technologies. The 2022 edition removed restrictions on hydrogen fuel cell manufacturing; the 2024 edition provided policy clarification on battery recycling; and the 2025 edition removed the landmark restriction on foreign-owned NEV power battery manufacturing — a barrier that had been in place since the first Negative List was published in 2017. Industry observers and foreign chambers of commerce (AmCham China, EU Chamber of Commerce in China) anticipate the 2027 Negative List will further open solid-state battery manufacturing by removing the Chinese-majority requirement, provided Chinese domestic solid-state battery companies have established sufficient competitive advantage by then. The sodium-ion >200 Wh/kg restriction is also expected to be relaxed once Chinese sodium-ion manufacturers reach volume production scale. However, lithium processing restrictions are unlikely to be lifted in the near term because lithium is classified as a “strategic mineral” under the State Council’s 2021–2035 Mineral Resource Plan. For foreign investors, the optimal strategy is to monitor the biennial Negative List revision cycle (next revision: December 2026, effective January 2027) and prepare JV-to-WFOE conversion clauses in current partnership agreements.

Recent enforcement trends: In 2025, MOFCOM conducted 12 targeted reviews of foreign-invested battery projects for compliance with Negative List classifications. Three projects — two in Guangdong and one in Jiangsu — were required to restructure their investment vehicles from WFOE to JV because their sodium-ion battery technologies exceeded the 200 Wh/kg threshold without proper classification. These enforcement actions highlight the importance of accurate technology classification at the investment registration stage. Foreign companies should engage a Chinese law firm with battery-sector expertise to prepare the technology classification documentation before submitting the investment application.

Bottom line: The direction of travel is clear — more openness. If you need to enter the market today, use a JV structure with a contractual option to convert to WFOE when the Negative List is revised in 2027.

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Official Sources

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