Workers assemble engines at a factory in Weifang, Shandong province. [Photo/China Daily]

China's industrial economy declined further in the final quarter of 2015, while overcapacity worsened, according to an independent report published by the Cheung Kong Graduate School of Business on Wednesday.

Business Sentiment Index, a key gauge in the survey, in the fourth quarter sank to 45, down from 47 in the third quarter and 50 in the first quarter.

Fixed investments are the largest problem at the moment, with only 5 percent of firms making investments, down from 11 percent in the second quarter, according to the survey result.

Asked if now is a good time for investment, 98 percent of firms think it is a neutral or bad time for investment, according to the survey.

Production and employment were relatively stable in 2015. But production of capital goods dropped substantially, the survey said.

The survey found excess capacity is the largest contributor to pervasive pessimism, with 54 percent of responded firms reporting that supply exceeds demand, the highest ratio ever seen since the second quarter of 2014. Prices have been in a deflationary phase since the second quarter.

"Lack of orders" was identified by 81 percent firms as the largest factor hindering their production in the following year, far higher than the factor of rising labor cost (14 percent) and material cost (12 percent).

Gan Jie, the school's Professor of Finance and chief author of the report, said any quick recovery is unlikely, as problems are structural and fundamental. Long-term industrial policy is key to a rebound, including industry upgrading and technological innovation. Easing monetary policy will not help industrial economy.

Described as the first of its kind, Gan's quarterly survey is based on stratified random sampling by industry, region and size from the National Bureau of Statistics' population of 488,000 industrial firms that have sales of over 5 million yuan. The survey has around 2,000 responding firms each time.