"In pursuit of GDP growth, local governments rely too heavily on fixed-asset investment. The result is homogeneous industrial structures," said Lu.
For example, in central areas of the country, four provinces - Henan, Hubei, Anhui and Jiangxi, all adjacent to one other - have listed often-unpredictable automaking industry as their regional pillar industry.
Low interest rates have also emboldened local governments to expand their credit lines beyond historic levels, which could present a potential threat to China's economy, Lu added.
According to figures provided by Haitong Securities Co Ltd, quoted in a report in Economic Information, a newspaper affiliated with Xinhua News Agency, local government debt is estimated to have grown to 13 trillion yuan by the end of 2012, representing 25 percent of GDP.
Analysts have called for quality to be given priority over growth rates.
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