Global attention is focused on the interest rate cut cycle, with investors expecting liquidity releases to stimulate market recovery. But there is an unavoidable question worth pondering: can interest rate cuts and liquidity injections truly drive economic growth?

**The essence of economic growth is labor productivity, not the total money supply**

The economic foundation of a region ultimately stems from the real output and value created by practitioners.

It can be understood this way: if we compare money to fuel and the economy to an engine, then interest rate cuts at best reduce the cost of fuel. When the engine itself is running normally, cheaper fuel can indeed improve efficiency; but if the pistons are rusted and the oil passages clogged, no matter how cheap the oil is, it will just flow away uselessly. The key is to repair the engine itself.

**The real bottleneck: transaction friction and institutional costs**

Why is market participation declining? It’s not due to a shortage of funds, but because the participation costs are too high.

Blocked information flow causes the market pricing mechanism to fail; transaction scrutiny makes investors’ steps difficult; asset liquidity controls undermine confidence in holding assets. When every transaction and transfer requires cumbersome compliance checks, institutional costs often swallow up transaction profits. The result is quite realistic: no one is willing to provide liquidity, and no one dares to participate actively.

**The phenomenon of capital idle circulation intensifies**

If the real economy stalls due to excessive friction, the liquidity released by the central bank will not flow into the industrial sector but will circulate among financial assets.

You will see abnormal activity in digital assets and derivatives markets, where the prosperity creates a false illusion of growth. But at the same time, the production side that truly needs funds still faces financing difficulties because that liquidity simply cannot reach the actual production links.

**The real solution**

The key is not to inject more liquidity, but to reduce market transaction costs. Only when asset mobility is more convenient, transactions are more transparent, and participants’ rights are better protected will dormant productivity be activated, and market vitality truly unleashed. Interest rate cuts may be part of monetary policy, but they are by no means the whole story of growth.