Author: Nian Xiaoman, Editor: Shui Jing
A bloodless yet potentially lethal overseas compliance storm is impacting, and even shaking, the global dominance map built with heavy investment by China's energy storage sector and the entire new energy industry chain.
According to media reports, in late June, Hungarian environmental authorities issued a decision to suspend the production license of Yunnan Energy New Material (002812.SZ), a Chinese battery component manufacturer, after detecting massive aluminum pollution in water samples collected from monitoring wells around the factory. Official groundwater testing reports revealed that the aluminum concentration in the groundwater at the site exceeded the standard by more than 13,000 times. In addition, heavy metals such as arsenic, zinc, lead, cobalt, cadmium, nickel, and barium all exceeded the limits.
According to Reuters, a city councilor in Debrecen stated that the Yunnan Energy New Material factory will remain closed for the "long term"; the city's mayor is currently facing pressure to resign.
Further research by the 24Chao Industry Research Institute (TTIR) revealed that Yunnan Energy New Material launched its Hungary wet-process lithium battery separator project in November 2020, marking the company's first production base outside China. Located in Debrecen, Hungary's second-largest city, the project is being constructed in two phases, with a total investment budget of approximately 787 million euros for both phases. The first phase was groundbreaking in 2022, and the first coating production line started trial production in July 2023. After fully entering the mass production stage in 2025, a major environmental compliance incident broke out in less than a year.
Notably, Hungary has always been a crucial gateway for Chinese enterprises to advance into Europe. Data from the Hungarian Investment Promotion Agency shows that in 2025, the total amount of foreign direct investment landed in the country was approximately 7.069 billion euros, of which Chinese investment reached 3.97 billion euros, accounting for 57%, making it the largest source of foreign investment for three consecutive years.
The Yunnan Energy New Material incident is likely not an isolated case. Tárkányi, then a member of parliament for Hungary's ruling Tisza Party and Parliamentary State Secretary at the Ministry of Transport and Investment, stated in an interview with local media in late May this year that the new government would not support CATL's (Contemporary Amperex Technology Co., Limited) expansion plans to build a second and third factory next to its existing site in Debrecen.
Across the ocean, under the influence of U.S. policies and compliance reviews, several major Chinese-funded projects have been halted. These include the suspension of Gotion High-Tech's factory in Michigan, the U.S.; the forced pause of the battery factory previously cooperated between CATL and Ford (as claimed by Ford); and the capacity reduction and delay of the "Elvis" project cooperated with Tesla (as reported by LatePost); on the evening of November 30, 2025, Canadian Solar, a leading PV module and energy storage integration company, issued an announcement declaring it will divest its PV and energy storage manufacturing business in the U.S. to cope with the "One Big Beautiful Bill".
According to a research report by the Net Zero Industry Policy Lab (NZIPL) at Johns Hopkins University in the U.S., the scale of overseas investment by China's green manufacturing industry has reached 250 billion U.S. dollars. The overseas footprint of the "new three items"—photovoltaics, power batteries (including energy storage batteries), and NEVs (New Energy Vehicles)—covers 54 countries globally, with 461 invested or committed investment projects.
Now, against the backdrop of accelerating global energy transition, the global energy storage market, and even the entire new energy industry, is entering a new cycle shifting from "scale competition" to "compliance gaming".
Solutions from Industry Leaders
Currently, Chinese enterprises have established an undisputed global dominant position in the global energy storage industry chain. However, the continuous escalation of multiple green trade barriers, such as the EU's new Battery Regulation, U.S. FEOC (Foreign Entity of Concern) restrictions, and carbon tariffs, is profoundly changing global competition rules. Compliance is no longer just a "pass" for market access; it is evolving into a "lifeline" that determines corporate survival and global competitiveness.
According to customs data, in 2025, the U.S., as one of the top three export markets for China's energy storage batteries, saw new overseas orders/cooperations reach 52.4 GWh, making it one of the main supply sources of energy storage batteries in the U.S. market. However, with the U.S. Section 301 tariff increasing from 7.5% to 25%, resulting in a combined tax rate of approximately 58% when stacked with other tariffs, and the comprehensive tightening of FEOC rules, the U.S. market became the only region among the top ten for China's energy storage exports to experience a decline, dropping by 19.7% year-on-year. This change profoundly reflects the substantial impact of global compliance barriers on China's energy storage export landscape.
According to forecasts by the China Commerce Industry Research Institute, by 2026, China's energy storage battery shipments will reach 689 GWh, with Chinese enterprises accounting for about 93% of global shipments. Driven by strong demand in overseas markets, the construction of an export compliance system will directly affect whether Chinese energy storage enterprises can maintain their leading position in global competition.
Currently, the choices and directions of industry giants such as CATL, BYD, and Sungrow are highly watched by the market. Every major strategic implementation or adjustment by them could have a profound impact on the future industrial landscape, which is also of great research and reference value for other players in the industry.
One faction is increasing strategic investment in systematic compliance. Taking CATL (300750.SZ) as an example, as the dual global champion in power batteries and energy storage, CATL is systematically deploying on the EU compliance battlefield, integrating overseas factory construction with compliance. CATL is investing in the construction of the world's largest zero-carbon power battery factory in Debrecen, Hungary, with a total investment of 7.34 billion euros (approximately 50.9 billion RMB). This factory is not a simple replication of capacity, but a "compliance factory" designed to fully meet EU standards—it is equipped with a lithium recycling production line with a recovery rate of up to 92% to meet the requirements of the EU's new Battery Regulation, locks in green electricity prices through power purchase agreements to cope with the EU carbon tariff, and receives subsidies from the EU's "Green Transition Fund". The factory also became the first Chinese battery enterprise to obtain the EU AR (Authorized Representative) qualification through the strategic acquisition of a local German testing institution, directly submitting EPR registration documents on behalf of non-EU enterprises, breaking the previous monopoly of European testing institutions in the certification market.
CATL also led two "Battery Passport" initiative pilot projects, cooperating with BMW Group to promote cross-border data exchange and carbon footprint accounting pilots for battery passports, utilizing the Catena-X automotive data ecosystem. CATL has also developed the "CATL Carbon Chain" integrated platform, achieving full life-cycle carbon emission management from raw materials to products, and applied a blockchain traceability system to build a full-chain data trust system from raw materials to recycling, becoming one of the first enterprises to pass EU compliance audits.
The other faction focuses on building robust compliance capabilities across the entire industry chain. Taking BYD (002594.SZ) as an example, BYD is deploying global compliance capabilities from the perspective of the entire industry chain, covering the export of all categories including energy storage, batteries, and NEVs.
In September 2025, BYD Energy Storage Co., Ltd.'s flagship energy storage products successfully passed the Canadian Standards Association (CSA) certification, obtaining an important safety pass to enter the North American market. Meanwhile, BYD energy storage cabinets have completed large-scale export deployment in Saudi Arabia, demonstrating the adaptability of the products in various global climates and application scenarios. BYD energy storage products have also obtained industrial battery compliance certification in the EU, paving the way for European market access.
BYD's 150MW wind-solar-storage virtual power plant project deployed in Australia is a model of combining compliance with commercialization. Relying on precise compliance layout and technical adaptation, the project smoothly passed the strict acceptance by the local grid company, achieving an annual revenue of 120 million Australian dollars, 28% higher than similar projects by local enterprises. This project proves that compliance is not only a "protective umbrella" for market access but also a "multiplier" for commercial value.
As a representative enterprise in integrated energy storage, BYD integrates compliance requirements throughout the entire chain from battery cells and battery packs to energy storage systems. In the field of carbon footprint management, BYD actively benchmarks against the requirements of the EU's new Battery Regulation, and its subsidiary, FinDreams Battery, is preparing carbon footprint declarations and compliance data required for battery passports for energy storage products in the European market.
From the perspective of market performance, the compliance-first strategy of leading enterprises is being transformed into competitive advantages. By thoroughly understanding the EU carbon footprint regulations in advance, CATL avoided a 30% import tariff for a 200MWh LFP (Lithium Iron Phosphate) energy storage system of a European virtual power plant, and shortened the delivery cycle by 40 days, significantly improving delivery efficiency and market competitiveness. This case clearly shows that against the backdrop of continuously rising global green trade barriers, compliance investment is shifting from a "cost investment" to a "profit center".
In fact, under the global compliance storm, the logic of competition and development is undergoing disruptive changes. A deep game centered on the "ability to build a global system-level compliance system" is being played out globally, and the outcome of this game is highly likely to change the global new energy landscape and even its future direction.
Common Issues and Challenges in Global Compliance Construction
Despite significant progress by leading enterprises, China's energy storage sector, and even the entire new energy industry as a whole, still faces severe compliance challenges.
First, the high and surging compliance costs are becoming a "survival threshold" for small and medium-sized enterprises (SMEs). The compliance requirements of the EU's new Battery Regulation involve carbon footprint data collection, system construction, third-party verification, battery passport system development, EPR registration, and supply chain due diligence, which poses a significant burden on SMEs in the energy storage sector with limited financial and technical capabilities.
Additionally, the "large-scale fire test" required by new regulations in the North American market costs Sungrow up to 30 million RMB for a single large-scale fire test. Even for small and medium-scale tests, the cost is at the million-level, imposing an unbearable cost pressure on a large number of SMEs.
Furthermore, entering different national markets for energy storage products requires completing multiple certification systems, such as IEC 62619, UL 9540A, SIRIM, TISI, PSE, and JC-STAR. The issues of long certification cycles and high testing costs remain prominent.
Compliance costs are also reflected in daily operations and potential fines. In Poland, omissions in Battery Regulation registration can lead to administrative fines of up to approximately 1.98 million RMB; while in the U.S., violations will face administrative penalties of up to 500,000 U.S. dollars.
Second, insufficient data collection capabilities in carbon footprint management have become a new technical barrier. As the core of global "green trade barriers," enterprises face systematic challenges from standards to data in carbon footprint management. Inconsistencies in carbon footprint accounting methods, system boundaries, and functional units make it difficult to horizontally compare and adopt data within enterprises or industries. Studies have pointed out that differences in accounting calibers can lead to deviations of over 50% in carbon footprint results for similar products.
The supply chain has multiple and long tiers, making upstream data acquisition difficult and of low reliability. Some enterprises still rely on secondary databases, while the actual production data collection rate is low (data shows that the data collection rate for Tier-2 suppliers is only 65%). Taking a leading enterprise as an example, to complete a comprehensive carbon footprint report, it deployed over 200 engineers for 6 months to complete data collection from more than 260 core upstream suppliers.
The average carbon intensity of China's power batteries is about 85 kgCO₂eq/kWh, which still has a gap with the EU's increasingly strict carbon footprint limit targets, part of which stems from carbon emissions in the upstream supply chain. According to public reports, over 60% of SME battery enterprises in the industry have not yet established a complete carbon footprint data collection system. The energy storage industry also faces prominent issues in carbon footprint accounting, such as inconsistent normative documents and method calibers, difficulty in tracing multi-level supply chain data, and high costs of acquiring primary data.
Third, the dilemma of data governance and supply chain transparency. The EU Battery Passport requires a complete data chain "from mine to cell," but a large number of SME suppliers have weak digital capabilities and rely on manual records, making it difficult to fully present these cross-border, multi-level, and globally distributed supply chain traceability chains. According to a pilot evaluation by the European Commission, currently, among the 43 battery enterprises participating in the test, less than 15% can fully trace information down to the mine level. In addition to EU regulations, enterprises must also meet the traceability requirements of the U.S. IRA (Inflation Reduction Act) and comply with domestic regulations such as the "Data Security Law," forming dual or even multiple compliance pressures.
The dilemma of supply chain transparency is a conflict between data sovereignty and disclosure red lines. First, data disclosure conflicts with trade secrets. Data required by the battery passport, such as supply chain structure and raw material sources, are highly commercially sensitive and may leak supplier information and cost structures, causing enterprises, especially midstream material manufacturers, to be very cautious when sharing data. Second, they face a typical "data sovereignty tension." The EU emphasizes data accessibility, while countries like China require data localization or impose restrictions on cross-border flows, forcing enterprises to find a compliance balance between the two.
Supply chain due diligence responsibilities will extend infinitely upstream along the industry chain. At the same time, the responsibility allocation mechanism among various entities in the battery passport is not yet clear, with loopholes and complexities. Once environmental risks occur in the supply chain, the brand reputation of downstream manufacturers, even if completely unaware, will suffer a severe blow.
Fourth, structural imbalance in the industry exacerbates internal friction, cannibalizing compliance investment resources. Although policy constraints are tightening, the industry still faces issues of blind construction and low-price competition, making it difficult to accumulate funds for compliance upgrades. Currently, the nominal capacity of domestic energy storage battery cells is about 1200 GWh, with an actual utilization rate of less than 50%, and a large amount of resources is sunk in invalid capacity. Against the industry backdrop of overcapacity and intensified price competition, it is extremely difficult for enterprises to strike a balance between investing massive funds and resources to build a compliance system and maintaining price competitiveness.
Some energy storage project indicators still involve speculative behaviors such as "reselling project approvals," which disrupts market order. Truly capable enterprises instead fall into the dilemma of difficulty in acquiring projects, further weakening the industry's initiative in compliance. Meanwhile, inferior products can still enter the market due to the lack of unified standards, disrupting order through low prices, putting enterprises that focus on compliance investment in the dilemma of "bad money drives out good."
Overall, the compliance construction of Chinese energy storage enterprises faces a complex compliance dilemma intertwined with "high costs, fragmented standards, insufficient capabilities, and trade restrictions." For leading enterprises, compliance costs are "strategic investments" to build barriers, but for the vast majority of SMEs, it is already a realistic challenge concerning survival.
Looking to the future, industrial competition will not only be a contest of technology and cost but also a comprehensive contest of enterprises' compliance prediction, proactive construction, and systematic management capabilities regarding complex global rules.
From the ZTE and Meng Wanzhou incidents years ago to the recent Yunnan Energy New Material incident, sanctions from Europe and the U.S. have sounded the alarm for us. Under the wave of globalization, a large number of Chinese energy storage enterprises are going global to participate in global competition, facing particularly significant criminal risks. It is undeniable that the current international order is still dominated by the U.S., which frequently adds Chinese enterprises to entity sanction lists using "long-arm jurisdiction." While there are indeed political factors involved, weak corporate compliance awareness is also an important reason for giving others a handle.
Looking at the development history of corporate compliance in China, in 2023, China revised the "Company Law of the People's Republic of China" (implemented in 2024): for the first time, it explicitly required comprehensive corporate compliance at the basic legal level; in 2025, the "Guiding Opinions on Promoting SMEs to Enhance Compliance Awareness and Strengthen Compliance Management" proposed special compliance management requirements for SMEs for the first time.
As mentioned above, Chinese green manufacturing enterprises are rewriting the global new energy landscape and even the industry's direction with an investment layout of nearly 250 billion U.S. dollars. In this grand journey of globalization, it is not only a head-to-head clash with global top players in terms of scale and technology but also a deep game involving the understanding and application of global political rules. As Shen Wei, a specially appointed professor at the Koguan Law School of Shanghai Jiao Tong University, said, compliance has never been a "high wall" that traps enterprises, but a "playing field" that filters global winners. Only by truly understanding and utilizing the rules can Chinese enterprises go far and steady in the overseas competition to reshape the global supply chain.
Important Signal: National Team Deploys Overseas Compliance Construction
Corporate compliance originated in the U.S. After more than a century of changes, with the optimization of the business environment, it has driven the development of various aspects of the industry. In the process of globalized operations, the corporate compliance system of U.S. companies has become a common practice for all multinational corporations. At the same time, some international treaties and standards reached by international organizations on these issues have been formed. Especially with the release and implementation of the international standard "Compliance Management Systems — Requirements with Guidance for Use" in 2021, corporate compliance has become a global legal phenomenon.
Compared with the compliance systems in Europe and the U.S., which originated from anti-corruption and anti-commercial bribery, China's compliance system, although starting late and developing slowly, has seen its strategic importance and national-level strategic status steadily rising with the extensive attention and continuous discussion in the industry in recent years.
The most influential and landmark event recently was the establishment of the Overseas State-owned Assets Bureau by the SASAC (State-owned Assets Supervision and Administration Commission of the State Council) in April 2026. Its main responsibilities are to guide the internationalized operations and optimization of overseas asset layout and structural adjustment of the supervised enterprises, undertake work related to the supervision of overseas assets of the supervised enterprises, strengthen the prevention and resolution of risks in overseas investment and operations, and undertake work related to the handling of overseas emergencies and crises. The institutional setup consists of four divisions: the Internationalized Operations Division, the Risk Prevention Division, the Supervision and Governance Division, and the Emergency Management Division.
From the main responsibilities and institutional setup of the Overseas State-owned Assets Bureau, the Internationalized Operations Division controls the overseas layout at the source, consolidates the foundation of legality and compliance, and assists enterprises in screening compliant investment fields and business directions according to foreign investment access restrictions, industry regulatory requirements, and anti-monopoly regulations of different countries, avoiding invalid investment behaviors or facing penalties due to violations of local market access rules and industrial policies.
For example, for sensitive fields such as energy, finance, and national defense technology where some countries restrict foreign investment, it guides enterprises to carry out compliance demonstrations in advance, conduct cooperation or adjust investment layout through compliant means, and ensure that investment behaviors comply with local laws and international general rules. Responsible for strengthening the prevention and resolution of risks in overseas investment and operations, one of its core tasks is to build a full-chain prevention and control system of "prevention in advance, control in progress, and evaluation afterwards" targeting the legality and compliance risks in the overseas expansion of state-owned assets, resolving compliance risks in the bud and avoiding losses of state-owned assets caused by compliance risks.
The Risk Prevention Division focuses on compliance risk prevention and control, building a forward-looking prevention and control system. For example, in response to a country's introduction of new foreign investment regulatory policies, raising industry access thresholds, or the international introduction of new trade sanctions and compliance review rules, it informs enterprises at the first time, guides them to carry out compliance analysis in advance, adjust business strategies, and avoid compliance risks brought by policy changes. At the same time, it guides enterprises to conduct compliance due diligence for overseas investment and operations. Before the launch of overseas investment, M&A, and cooperation projects, it comprehensively verifies the legal and compliance issues involved in the projects, including the compliant operation of the target enterprise, local regulatory requirements, and potential compliance risks, forming a due diligence report to provide a compliance basis for project decision-making and avoiding compliance risks from the source.
The Supervision and Governance Division strengthens full-process supervision and builds a solid line of defense for compliant operations. In terms of overseas asset operation supervision, this division will establish and improve the overseas asset supervision and management system, clarify supervision standards and processes, and focus on supervising the compliance of core links such as property rights management, fund operation, and financial accounting of enterprises' overseas assets. Regarding the registration, transfer, and mortgage of overseas asset property rights, it urges enterprises to strictly abide by the property rights management laws and regulations of China and the local overseas areas, standardize the property rights transaction process, eliminate unauthorized disposal of overseas state-owned assets and illegal transfer of property rights, and ensure clear property rights and compliant circulation of state-owned assets. In terms of fund operation supervision, it focuses on verifying the use, allocation, and settlement of enterprises' overseas funds, urges enterprises to comply with relevant regulations on China's foreign exchange management and cross-border fund flows, as well as local financial regulatory requirements overseas, prevents illegal and irregular cross-border fund flows, misappropriation of overseas funds, and illegal overseas financing, and ensures the legal and compliant operation of overseas funds.
The Emergency Management Division undertakes work related to the handling of overseas emergencies and crises. For overseas emergencies caused by legality and compliance issues, it establishes a mechanism for rapid response and efficient disposal to minimize the loss of state-owned assets and negative impacts caused by the incidents, and maintain the good image of state-owned enterprises and state-owned assets going global. In terms of emergency disposal of compliance emergencies, this division will take the lead in coordinating relevant departments, enterprises, and relevant local overseas institutions to carry out emergency disposal work. In response to investigations and penalties by overseas regulatory departments, it guides enterprises to actively cooperate with investigations, sort out relevant compliance evidence, safeguard their legitimate rights and interests in accordance with the law, and strive to reduce or exempt penalties; in response to litigation and arbitration caused by illegal and irregular acts, it guides enterprises to hire professional overseas legal institutions, formulate reasonable response strategies, actively participate in litigation and arbitration procedures, and maximize the recovery of state-owned asset losses; in response to project suspension, asset freezing, and other situations, it guides enterprises to communicate and coordinate with local overseas regulatory departments and partners to resolve compliance issues as soon as possible and restore project operations and asset liquidity. At the same time, in the process of emergency disposal, it urges enterprises to strictly abide by local laws and regulations and international general rules to avoid triggering new compliance risks due to improper disposal.
The four divisions of the Overseas State-owned Assets Bureau do not operate in isolation but form a closed-loop compliance management of "planning-supervision-prevention-disposal" through overall coordination and linkage, comprehensively ensuring the legality and compliance of state-owned enterprises and state-owned assets going global. On the one hand, the layout planning of the Internationalized Operations Division provides direction and basis for the work of the Supervision and Governance Division, the Risk Prevention Division, and the Emergency Management Division, ensuring that supervision, prevention, and disposal work are in line with the enterprise's internationalized operation strategy; on the other hand, the supervision results of the Supervision and Governance Division, the risk investigation results of the Risk Prevention Division, and the incident disposal results of the Emergency Management Division will also be fed back to the Internationalized Operations Division, providing reference for the optimization of overseas layout and structural adjustment of enterprises, and promoting enterprises to steadily enhance their compliant operation level.
Today, an indisputable fact is that overseas compliance is the lifeline for enterprises going global, and even more so, the core premise for achieving high-quality "going out."
Currently, the global regulatory landscape is becoming increasingly strict, with significant differences in rules on foreign investment access, anti-monopoly, taxation, and environmental protection among countries. Geopolitical factors have also added much uncertainty to overseas operations, making the compliance risks faced by enterprises in overseas operations increasingly complex. Overseas compliance is not only the basic requirement for enterprises to abide by domestic and foreign laws and regulations and avoid penalties, but also a key line of defense to ensure the security of state-owned assets and prevent losses. Once compliance issues arise, enterprises will face huge fines, project suspension, asset freezing, and other losses, and may even damage the national image. At the same time, compliant operation is an important support for state-owned enterprises to enhance their international competitiveness, helping enterprises gain local market recognition, maintain brand reputation, deepen trust with overseas partners, and lay the foundation for long-term and stable development.
The author believes that at a time when the global energy storage industry has shifted from "capacity competition" to "compliance competition," Chinese enterprises need to build systematic compliance capabilities to transform global compliance from a "cost burden" into a "competitive moat," so as to consolidate their advantages and win the future in the new wave of global energy transition.
Currently, in terms of overseas compliance, the national team of state-owned asset supervision has received official systematic and all-around support. For numerous private enterprises in today's comprehensive going-global, only by continuously strengthening their own compliance awareness and improving their compliance systems can they go far and steady in internationalized operations.
About the Author
Graduated with a bachelor's degree in law from a domestic university and a master's degree in MBA from the U.S., holding a Chinese lawyer's professional qualification certificate; in the early years, served as a full-time lawyer in a U.S. law firm. After returning to China, successively served as the director of the investigation department of a top domestic financial weekly, legal manager of a large investment company, and director of the legal compliance department of a large group company. Long-term responsible for the enterprise's legal affairs and corporate compliance system construction, including compliance plans, compliance management systems, and compliance codes of conduct. Also serves as a part-time lecturer at a university, with long-term research on overseas compliance risk management, possessing 20 years of corporate legal affairs management experience.