A warning from state planners on over-investment threatens key factory projects China's top planning body has warned of over-investment in the car industry. The warning comes as Taiwan's richest man considers construction of a large car factory in Ningbo - a project first offered to Yang Rong, the former chairman of Brilliance China now living in exile in California. On Saturday, the State Development and Reform Commission began a meeting in Kunming on industrial development, at which deputy chairman Zhang Guobao said there had been blind investment, chaos and disorder in the steel and car industries. 'While these problems should mostly be solved through the market, the government must play a strong role through macro-economic regulation,' he was quoted as saying. China already has substantial over-capacity. It has 123 car plants which can manufacture 5.5 million units a year, against the 3.24 million actually produced last year. All major producers have announced plans for higher output. 'Opinion is sharply divided within the government and the industry,' commented the International Finance News on Friday. 'One view is that steps must be made to limit production and investment. The other view is that the over-capacity is a natural result of the market and should be allowed, because it will lead to the closure of low-quality and inefficient plants.' But economist and philosopher Adam Smith's rules of the market do not operate normally in China, where city and provincial governments support car plants as sources of jobs and tax revenue. Advocates of non-interference by the government argue the level of car ownership in China remains low by world standards. Industry estimates put the number of vehicles on the road at the end of this year at 23.6 million, or fewer than 20 per 1,000 people, compared with 175 per 1,000 in Mexico and 114 in Brazil. This debate will intensify the pressure on Formosa Plastics president Wang Yung-ching, who is considering a US$1 billion investment in a plant in Ningbo that would have an output of up to 300,000 vehicles a year. Two weeks ago, Ningbo government officials gave Mr Wang, 86, a tour of the site. The site had originally been earmarked for Mr Yang, whose Shenyang-based car firm was the first mainland company to be listed on the New York Stock Exchange. Mr Yang later fell out with the Liaoning government, which stripped him of his share of Brilliance China and declared him a criminal. He escaped to the United States, where he is suing the Liaoning government for what he deems theft of his property. Industry sources said one reason the Liaoning government turned against Mr Yang was his plan to build a factory in Ningbo, which he decided offered a better investment environment than Shenyang. The Formosa Plastics group set up its car subsidiary only five years ago and had no experience in building cars on the mainland. It had been discussing the possibility of production in China with major European and Japanese manufacturers. Mr Wang enjoys good relations with the Ningbo municipal government because his company has invested in petrochemicals and piers in the city, which has one of the best deep-water harbours on the east China coast.