Study: Monetary easing not a magic pill for economic malaise

Monetary easing is not a magic cure for China's economic malaise, as it does little to solve the chronic disease of overcapacity, said an independent report published by the Cheung Kong Graduate School of Business.

The quarterly industrial economy survey by the school's finance professor Gan Jie showed that after stabilizing in the first quarter, China's industrial economy did not improve in the second quarter. The Business Sentiment Index, a key indicator in the survey, declined to 47 from the first quarter's mark of 50, indicating a slight contraction. Fixed investments remained sluggish, with only 9 percent of the firms surveyed making investments.

According to the study, about 55 percent of the respondents cited "lack of orders" as the key factor behind constrained manufacturing. Higher labor and raw material costs were the second and third factors, at 14 percent and 10 percent, respectively. Only 3 percent of the respondents considered "financing" as a bottleneck.