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China's industrial overcapacity, especially its economic growth is wreaking far-reaching damage on the global economy, the European Union Chamber of Commerce in China said Thursday.
The chamber said the overcapacity problem in China is by no means a new one, but its pervasive influence has become ever more prominent now. In light of the global economic crisis, China's overcapacity has become even more destructive for both the Chinese and international economies.
"The crisis has throttled demand for exports from China at a time when even more investment, in the form of the Chinese government's massive stimulus package, is being pumped into building new plants and adding unnecessary capacity," the chamber said. "As a result, the problem is actually getting worse in many industries."
"The European Chamber welcomes these very positive measures, but we also caution that much remains to be done to bring overcapacity under control and to create the economic and political conditions to ensure that it does not re-emerge in the future."
It said the addition of unnecessary capacity in certain industries raises threat from non-performing loans. At the same time, the global impact already can be felt in the form of growing trade tensions.
Moreover, the business group said the Chinese stimulus package has poured credit into increasingly questionable projects and will almost certainly increase direct and indirect subsidies to investment and manufacturing.
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