China's Excess Industrial Capacity Damaging Global Economy, says EU Chamber

While China is leading the world out of recession, the country's excess industrial capacity could damage the global economy, reports Bloomberg, quoting the Europe Union Chamber.

 

Further quoting the chamber, Bloomberg says that China is adding capacity when global demand is yet to recover from the financial crisis, increasing the risk of trade frictions undermining commerce and making the threat of non-performing loans within the nation “ever larger.”

 

According to Bloomberg, the chamber says China’s own economy is the main “victim” of excess capacity. "Lower profits mean companies lack cash to invest in research and development and develop more valued-added goods," says the chamber in a report obtained by Bloomberg. The report adds that businesses are also forced to cut costs, contributing to slower wage growth and less consumption.

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