BEIJING (REUTERS) - China will use market solutions to ease its overcapacity woes and will not use investment stimulus to expand demand, Premier Li Keqiang said during a recent visit to northern Shanxi province, according to state media.

"We will let the market play a decisive role, we will let businesses compete against each other and let those unable to compete die out," the state-run Beijing News quoted Mr Li as saying. "At the same time, we need to prioritise new forms of economic development."

Mr Li said the country needed to improve existing production facilities because even during an enormous steel glut last year, China had to import certain high-quality steel products including the tips of ballpoint pens.

China needs to set ceilings on steel and coal production volumes and government officials should use remote sensing equipment to check companies, the premier also said, according to the article which was reposted on the State Council's website.

During his visit to Chongqing earlier this month, President Xi Jinping said China would focus on reducing overcapacity and lowering corporate costs.