THE confidence of Chinese businesses fell sharply to a seven-year low in the second quarter in contrast to an improving sentiment in major developed countries, an industry survey found yesterday.

The number of Chinese mainland's respondents who expressed optimism outpaced those who were pessimistic by only 4 percent in the April-May period, significantly down from 25 percent in the first quarter, said Grant Thornton, a global auditing firm.

It's the lowest since the firm started compiling China data in 2006.

Forty percent of mainland respondents cited an uncertain economic outlook as most threatening to their business, and fewer firms said they will increase funds in manufacturing and research in the next 12 months.

"We hope the government could do more to reduce financing cost especially for small businesses to help them survive in the market," said Xu Hua, a leading partner at Grant Thorton China.

Meanwhile the confidence of US firms surged to 55 percent from 31 percent, the highest since 2005. The UK rallied from a negative to 35 percent while Japan saw the first positive figure since data were compiled in 2003.

The survey, released after China's exports in June posted the first annual drop since January 2012, covers 12,500 businesses annually in 44 economies, the firm said.