EUCCC: China could face trade backlash

China is risking a trade backlash from the EU in 2010 as an over-expansion of industry capacity could lead to a flood of cheap exports, the Financial Times reported, citing the EU Chamber of Commerce in China (EUCCC). The EUCCC said in a report that it was deeply concerned about protectionism as industries including steel, cement and plastics were "blindly expanding." The report comes a month after Beijing announced measures to limit capacity in seven sectors amid fears that over-investment would generate non-performing loans (NPLs) and hamper the economic recovery. Infrastructure has been the primary focus of China's US$586 billion stimulus package, but this has had the spill-over effects with continued expansion in steel, aluminium, cement and chemicals. The EUCCC warned that overcapacity also curtails companies’ ability to invest in innovation and makes it hard for the government to enforce environmental regulations.