Rising costs are also holding back mainland business development. Employees at 68 percent of mainland companies can expect a pay rise in the next 12 months, and 33 percent of businesses are concerned about a severe shortage of skilled workers.

Rising energy costs were cited by 46 percent of firms, up from 43 percent in the fourth quarter, the report showed.

Chinese sentiment improved towards the global economy, to 44 percent in the first quarter from 27 percent in the preceding three months, the research showed, driven by recovery in the United States and Japan.

"The improved economy and business sentiment in both developed and developing countries will also help to fuel the recovery of China's economy in the second quarter," Wang Haifeng, a researcher with the Institute for International Economic Research at the National Development and Reform Commission, said.

US business optimism increased to 66 percent from 36 percent in the first quarter, compared with the fourth, and by 11 percentage points in Japan, to 17 percent, according to the IBR. Optimism in the European Union improved and in Latin America it increased to 43 percent from 26 percent, driven by Brazil, which hosts the FIFA World Cup from June 12 to July 13.

Top 10 countries with highest GDP in 2013	Top 10 regions with highest GDP in China