A large-scale, independent survey from the Cheung Kong Graduate School of Business (CKGSB) in Beijing sheds new light on the current state of the Chinese economy.

The most prominent change revealed in CKGSB’s large-scale quarterly survey of around 2,000 companies from China’s industrial sector was a significant rise in product prices in 2016 Q4, with production costs seen as the main driving factor. Meanwhile, the survey’s overall Business Sentiment Index (BSI) stood at 46, indicating a slight contraction, while investment remained sluggish and overcapacity stayed at its historical high.

Described as the first of its kind, the large-scale, micro-level quarterly company survey, authored by CKGSB Professor of Finance Gan Jie, is based on stratified random sampling by industry, region and size from China’s National Bureau of Statistics’ company database, with around 2,000 firms responding to her survey each quarter. With much official data widely questioned, her results shed light on how the industrial sector is truly coping and what types of reforms are needed.

Commenting on the survey’s results, Prof Gan Jie said, “2016 was a difficult year for the industrial economy. The BSI stayed at 46 for four consecutive quarters, marking a continued, if slight, contraction. This is a result of sluggish investment. The main theme of the industrial economy in 2017 will still be the reduction of overcapacity, while inflation and cost rises should be carefully watched. Against this background of overcapacity, it remains our view that a loosening of monetary policy would not revive the industrial economy.” In recent years, China has focused on upgrading its industrial sector: automation now plays an increasingly important role, but the human cost is real. Based on the size distribution of firms with employment reduction and the number of industrial workers in total, the report estimates that a total of 5.5 million jobs were lost in 2016.