China's consumer inflation fell to a 30-month low in July, stoking hopes of further monetary easing by the central bank as it looks to avoid a hard landing amid lingering concern about the ongoing eurozone debt crisis.
The consumer price index (CPI) rose 1.8% last month compared with a 2.2% rise in June, official data released on Thursday showed.
That is a big pullback from a three-year high last July of 6.5%.
Economists had forecast a reading of 1.7% in July.
Industrial output, retail sales and fixed-asset investment data are due for release later on Thursday.
China's wholesale prices also contracted further in July, according to official data released on Thursday.
The monthly producer price index dropped 2.9% a year earlier, accelerating from a 2.1% deflation recorded in June, figures released by the National Bureau of Statistics showed.
Economists had expected the PPI to drop 2.5%.
Markets in Hong Kong and Shanghai diverged as investors digested the inflation data and mulled possible policy response in the days to come.
China's economic growth has been decelerating since the beginning of 2011, reaching 7.6% in the second quarter of 2012, the weakest pace since the global financial crisis.
Economists expect a pick up in the third quarter to 7.9% and full-year growth of 8%, above the official target.