China could face a protectionist backlash next year because of a huge over- expansion of industrial capacity in recent months that may lead to a surge in cheap exports, a European business group said yesterday.

The government's massive stimulus measures to revive the economy have exacerbated the already serious problem of manufacturing overcapacity, the European Chamber of Commerce in China said in a report. Industries such as steel, cement and plastics were still “blindly expanding”, it said.

“By the second half of 2010, there will be far more dumping cases against China for unfair trading,” said Joerg Wuttke, chamber president. China's over- capacity was putting “political pressure on our leaders . . . We are really concerned about protectionism”.