In a survey of the chamber’s members, 56% of respondents identified local government policies aimed at luring investment as the main macroeconomic reason for overcapacity; loose lending was the second most frequently cited cause.
Protectionist backlash possible
Jörg Wuttke, seen here, chairman of the EU Chamber of Commerce in China was speaking at the introduction of a study into industrial overcapacity in China.
The report said, “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."
China Digital Times reported that Jörg Wuttke welcomed efforts by the central government to curb new capacity, but said it was often powerless in the face of local governments that craved new factories for the tax revenue and jobs they could generate.