Despite massive building work, officials now fear oversupply

The country's industrial output grew at an annual rate of 16.1% in October, slightly down on September's 16.5%, said the National Bureau of Statistics.

Jia Yinsong, an official at the National Development Reform Commission, said steel was one area overproducing.

Excess steel production is expected to top 100 million tons this year.

Chinese steel demand is set to exceed 300 million tons in 2005 official figures show, with production above 400 million tons.

We're concerned that domestic demand is not sufficient to absorb all this production Economist Rob Subbaraman

Demand is predicted to rise only marginally to 320 million tons by 2010, but output capacity is estimated to hit 530 million tons by 2008.

Another official report warns that Chinese car production could be double that of domestic demand by 2010.

'Insufficient demand'

Rob Subbaraman, an economist with Lehman Brothers in Tokyo, said the figures showed exactly why China was continuing to put so much emphasis on exporting.

"We're concerned that domestic demand is not sufficient to absorb all this production," he said.

"We worry about an emerging oversupply problem in China, and from a broad macroeconomic perspective this helps explain why China has a record trade surplus and low inflation."