BEIJING • China's overcapacity in heavy industries is wreaking "far-reaching" damage on the global economy, with steel production "completely untethered" from market demand, the European Union Chamber of Commerce in China said yesterday.

The Asian giant's steel industry manufactures more than the next four largest producers combined - Japan, India, the United States and Russia - the chamber said in a report, warning that more than 60 per cent of China's aluminium industry has negative cash flow.

And in just two years, its cement output equalled the amount produced in the US during the 20th century.

"China has not followed through on the attempts it has made over the last decade to address overcapacity," chamber president Joerg Wuttke said in a statement.

Brussels has launched new anti-dumping probes into Chinese steel imports, as producers in both Europe and Asia struggle with global prices that have plummeted in the face of oversupply.

"Overcapacity has been a blight on China's industrial landscape for many years now, affecting dozens of industries and wreaking far-reaching damage on the global economy in general, and China's economic growth in particular," the chamber's report said.

The issue has led to trade tensions between the world's second-largest economy and developed countries that accuse it of dumping in their markets.

China accounts for half of the world's steel production but internal demand has slowed sharply along with economic growth, forcing it to look overseas.

Its steel exports soared 20 per cent last year, according to Chinese Customs data.

The EU launched investigations this month into imports of Chinese steel, with trade commissioner Cecilia Malmstroem warning: "We cannot allow unfair competition from artificially cheap imports to threaten our industry."

AGENCE FRANCE-PRESSE