Business optimism rises in first quarter

Chinese businesses grew more optimistic in the first quarter about the 12-month economic outlook, suggesting increased confidence, the latest Grant Thornton International Business Report 2014 showed on Thursday.

China's first quarter GDP grows 7.4%

Top 10 regions with highest GDP in China

The index rose 16 percentage points from the previous three-month period to 38 percent, according to the report.

"Despite the economy slowing down in the first quarter, the economic data exceed market expectation and suggest a continued optimization in the industrial structure," said Xu Hua, CEO of Grant Thornton China.

China's economy expanded 7.4 percent in the first three months, below the government's target of 7.5 percent for 2014. Market consensus was for 7.3 percent. The economy is expected to improve this quarter with stable growth, which boosts business optimism, Xu said.

Businesses remain conservative about their own development, according to the survey. Expectations fell for increased revenue, at 31 percent; profitability at 16 percent, an 18 percentage-point decline; exports at 4 percent; product prices at 17 percent; employment at 9 percent.

"On one hand, it is still in the early stage of the new year, and lots of orders are still to be confirmed, which affects businesses' expectations," Xu said. "On the other hand, businesses are somewhat impacted due to the busy job-hopping season in the first quarter." More support should be offered to Chinese companies faced with financial constraints, so they can expand funding sources and charge their business engine, Xu said.

Twenty-nine percent of Chinese mainland businesses cite a shortage of finance as the most important factor constraining expansion, rising 11 percentage points over the last quarter. Bank loans remain businesses' preferred financing channel, with 30 percent planning to finance through it.

Among other channels, only 6 percent of Chinese businesses plan to raise funds via an initial public sale of shares. The percentage of businesses choosing private equity and venture capital or bond sales as a way to raise money stood at 8 and 10 percent respectively.