The EU launched probes this month into imports of Chinese steel, with trade commissioner Cecilia Malmstroem warning: "We cannot allow unfair competition from artificially cheap imports to threaten our industry."
This month, Luxembourg-based world leader in steelmaking ArcelorMittal blamed China for a colossal $8 billion loss in 2015, at a time when thousands of jobs are being cut across the industry.
But many Chinese steel firms are also losing money, and Beijing has announced plans to cut production by as much as 150 million tonnes over the next five years.
Despite authorities' vows to tackle excess production, the EU chamber report said Beijing's prioritisation of industrial policies over consumption meant "the Chinese government's current role in the economy is part of the problem".
To achieve change, it said the government needed "a willingness to change itself".
Chamber president Wuttke told reporters: "We are now in a far more worse position than we were before.
"Beijing increasingly has the same problems as Brussels: making things happen. That was not the case 10 or 15 years ago. Local protectionism is very strong."
Beijing hopes to soak up overcapacity by selling its excess production to markets in Central Asia and the Middle East as part of President Xi Jinping's One Belt One Road plan, which has been touted as a revival of ancient Silk Road trade routes.
But those markets were not big enough to absorb China's overcapacity, Wuttke said. It "is a complete mismatch, it will not put even a minor dent in the overcapacities in China", he said.