Chinese oversupply of steel is "damaging and distorting" global markets, US Treasury Secretary Jacob Lew said Monday, joining a chorus of criticism that blames Beijing for plant closures and job losses in the industry worldwide.

China is the world's number one steelmaker, producing more than half of global output, but stands accused of flooding the market with steel at below cost prices -- dumping -- in violation of international trade rules.

"Excess capacity has a distorting and damaging effect on global markets," Lew said at a key annual meeting between the world's top two military and economic powers in Beijing.

"Implementing policies to substantially reduce production in a range of sectors suffering from overcapacity, including steel and aluminium, is critical to the function and stability of international markets."

Lew's comments echo those of other senior officials around the world who have blamed the Chinese supply glut for turmoil in Europe and elsewhere.

Among those hit has been Indian-owned Tata Steel, which said in March it was selling its struggling British assets -- putting 15,000 jobs at risk.

At Group of Seven summit talks in Japan last month world leaders said the global steel oversupply must be "urgently addressed", in what was seen as a barely disguised jab at China.

The US has punished Beijing with harsh tariffs, most recently in March, when it slapped a 300 percent rate on the cold rolled steel used to make auto parts.

The EU, the second-biggest steel producer, has launched a dumping probe into Chinese steel but angry manufacturers have urged it to mirror the US's tough tariffs.

The 28-nation bloc said this month that granting market economy status for China at the World Trade Organization was "untenable" because it would cost jobs in Europe in industries such as steel.

The designation would make it much harder for major economies to fight Beijing over alleged unfair trading practices.

- Social instability -

Chinese leaders have repeatedly pledged to address the issue of excess capacity, admitting it is a drag on their own economy.

Demand for steel has fallen as the rate of economic growth has slowed, leaving producers making hundreds of millions of tonnes more than they can sell domestically each year.

Beijing has vowed to eliminate 100 million to 150 million tonnes of capacity -- out of a total of 1.2 billion tonnes -- by 2020, saying the reforms would cost 500,000 jobs.

But local governments have been reluctant to act, fearing the social instability that mass layoffs could cause.

"I don't think that we've seen the implementation yet on policies to deal with excess capacity," Lew said Sunday, Bloomberg reported.

"They made the policy commitment to make these changes, they now have to implement and execute, not just at the national level but at the provincial level as well."

Monday's US-China Strategic and Economic Dialogue in Beijing is a key annual meeting between the world's two top economic powers.

The US delegation used the occasion to call on China to liberalise its investment rules to create a "level playing field" for American investment and trade.

Concerns about the business climate in China are rising, Lew said.

"Candidly, foreign businesses wonder if they are welcome, and find China's regulatory environment harder and harder to navigate," he said.

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Tata Steel