"Structural reforms in many industries have shown little progress in the past months," he said. "There are problems of overcapacity and duplication of facility construction. In some places, these problems are becoming even more serious."

Xiong added that the government will monitor market conditions longer before allowing construction to start on two new big steel mills along the coast, including a 10-million-ton-a-year mill to be built by Baosteel Group Corp in Zhanjiang, Guangdong Province. The NDRC gave approval for the two projects in early 2008, on condition outdated capacity would be closed.

Look overseas

Xiong also suggested that Chinese producers of steel and non-ferrous metals can implement a "go-abroad strategy" and explore overseas markets. He also denied reports that overcapacity was triggered by the country's 4 trillion yuan (US$586 billion) stimulus package.

"Some of China's stimulus spending is used in infrastructure construction like roads and railways," Xiong said. "It lifted the demand for steel and cement to some extent. But there is not much direct investment in these industries."

Xiong also said China should have no trouble achieving the government's economic growth target of 8 percent this year.