CHINA'S efforts to curb overcapacity are a positive first step but further improvement should secure sustainable development and reduce trade tensions, a study by the European Union Chamber of Commerce in China showed today.

The study offered more than 30 suggestions, including stimulating domestic consumption and ensuring new investment is "smart" use of funds, and promoting a vibrant service sector by encouraging competition.

It also proposed consolidating sectors suffering from overcapacity to make them more market-driven, while reforming price mechanisms to create a more balanced cost system for capital, energy and resource inputs.

The State Council, China's cabinet, unveiled a series of measures in late September to curb expansion in industries including steel, cement, glass, coke, wind turbines and shipbuilding. The government also limited land supply to sectors with excess capacity.