The official manufacturing PMI fell less sharply but still slid to a six-month low of 51.2 in April from March's near five-year high of 51.8, according to data at the weekend. Analysts had expected a reading of 51.6.
Growth in China's services sector slowed to 54.0 in April, from the previous month's 55.1, but remained robust.
BNP Paribas' senior economist for Greater China, Chi Lo said the data showed the Chinese economy was still facing "quite a lot of" headwind, although economic growth for 2017 will still be around Beijing's target around 6.5 percent.
However, there are other worries for investors.
"The near-term concern the market has is more on the regulatory tightening to clean up the system rather than the growth slowdown," Lo told CNBC's "Squawk Box".
The Chinese central bank is trying to reign in leverage in the wholesale funding market that is used primarily by smaller regional banks and shadow banks to fund a range of activities including asset purchases and financing capital outflows, which authorities are trying to stem.
SLOW MODERATION EXPECTED, NOT SHARP COOLDOWN
China's economy expanded 6.9 percent in the first quarter, fueled by a construction boom. That is likely to give it enough of a tailwind to hit Beijing's full-year target of around 6.5 percent even if growth slowly fades in coming months as many analysts predict.
A flurry of government measures to cool the overheating property market and a slow rise in borrowing costs are expected to tap the brakes on surging property investment and construction eventually.
Those concerns, along with a tightening regulatory crackdown on riskier forms of lending and speculation, saw Chinese stocks post their worst month of the year in April.
Indeed, the degree of business confidence in April was the lowest so far this year, the survey noted, although companies generally expect output to increase over the next year.
Worries about operating costs and economic conditions weighed on confidence, though other survey respondents pointed to positives such as new product launches and a moderation in soaring input prices that have been squeezing profit margins for companies in the middle of supply chains.
Growth in total new orders slowed sharply to 50.9 from 52.7 in March, with the rate of expansion in new export orders also easing.
"The Chinese economy may be starting to embrace a downward trend in the near term as prices of industrial products decline and active restocking comes to an end," CEBM's Zhong said.
The pace of job shedding also intensified in April to a three-month high as a result of cost-reduction efforts and the non-replacement of voluntary leavers and retirees.
Compared with the official PMI, the Caixin/Markit survey tends to focus more on small- and mid-sized manufacturers. Both reports, however, suggested that smaller firms are under more pressure than their larger, state-backed peers.
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