The EU Chamber of Commerce has released a report, Overcapacity in China: Causes, Impacts and Recommendations.

Overcapacity is a blight on China’s industrial landscape, affecting dozens of industries and wreaking far-reaching damage on the global economy

The reports says China's stimulus package has made this overcapacity much worse.

One of the problems is China dumps it's excess goods onto the market, selling them for much less than the cost to produce.

This hurts other national economies in terms of wiping out their domestic industries through unfair competition.

I think the report is a little polite, ignoring China's intentional and strategic market dumping and other strategies to capture yet another manufacturing sector for itself long term.

More from Bloomberg:

The world’s third-biggest economy has rebounded this year on stimulus spending and a $1.3 trillion credit boom. 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,” the EU Chamber said.

“The Chinese stimulus package has poured credit into increasingly questionable projects,” the business group said, without identifying specific ventures. “The global impact already can be felt in the form of growing trade tensions.”

U.S. President Barack Obama and Chinese President Hu Jintao pledged this month to work to ease frictions, exacerbated by U.S. duties on Chinese tires.

The chamber recommended 30 measures to cut overcapacity, including letting an undervalued yuan gradually appreciate, reducing a “subsidy” for Chinese manufacturers.

By the European Union coming out so forcefully on China, we should see increasing pressure globally for China to float their Yuan (unpeg the RMB from the dollar).

What is so amusing, the local governments inside China try to increase factories and production....for jobs and tax revenues.

Sound familiar? Or should we say not so familiar but should be?