Capital expenditure by Chinese companies was down to a five-year low, even as new employment at private companies fell to its lowest level in four years during the first quarter of 2016, a private survey of over 2,200 firms showed.
However, the survey carried out by the China Beige Book International (CBB), also showed that profits in the first quarter rose from the earlier quarter's lows as revenue growth steadied.
The survey found that only 23 per cent of the surveyed companies added to their workforce and most companies expected further hiring weakness ahead, according to CBB.
''Our data show that firms first stopped borrowing, then cut spending and now are becoming allergic to hiring,'' the survey said.
In the past year, as the Chinese economy reeled under a slowdown, the government had sought to shift gears toward consumption and services and away from manufacturing and investment.
Factory activity in the country's manufacturing sector was down for the seventh straight month in February, even as workforce levels dropped.
"It's unclear whether the economy as a whole weakened again in the first quarter. But policy challenges appear to have grown, and Beijing, therefore, may perceive the economy as weaker," survey report authors Leland Miller and Shehzad Qazi wrote.
Economists have questioned China's official statistics for years and turned to private surveys such as the CBB and measures such as concrete, steel or electricity production to better assess the changes in the world's second-largest economy.
Meanwhile, vice premier Zhang Gaoli told a high-level economic forum last week that recent data showed that the economy was improving.