Excess industrial production has worsened the economic slowdown in China, according to a report released on Monday by the European Chamber of Commerce. Ultimately, this could lead to global economic disorder, the report warns.

According to the New York Times, the report conducted by the European Chamber of Commerce in China blames the leaders for failing to address the pressing issue of industrial production in the country. The report also points blame towards uncooperative government officials and ineffective government policies. The report noted much inefficiency in China's major industries like steel, cement and chemicals.

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According to the president of the chamber, Joerg Wuttke, the failure to address the issue could hold back China's economic recovery. More so, Wuttke noted that parochialism has also aggravated the problem.

For years, China has been suffering from overcapacity or excess production. This happens when demand for a product falls well below the industry's capacity to produce. Experts say the problem has been aggravated as the government has focused its resources on heavy industries like shipbuilding and glassmaking in recent years. This was done despite the declining global demand.

Overcapacity has also resulted in tensions among China's trading partners.  Chinese producers have decided to export the excess and some foreign countries do not take this too well. The United States for instanc has imposed tariffs on select Chinese steel, while Europe is fighting against the importation of cheap Chinese steel.

Chinese officials have downplayed protests against cheap Chinese steel in Europe by stating that overcapacity is not just happening in China, but all over the world. The Chinese government is already reconstructing the steel industry and has promised to cut production in some industries that over produce.

In the report, the European Union Chamber of Commerce in China offers several suggestions to combat overproduction such as cutting capital expenditures and imposing value-added tax so local government units have other sources of income.

TagsEuropean Chamber of Commerce, Joerg Wuttke, China economy