China's annual consumer inflation fell to a 30-month low of 1.8 percent in July from June's 2.2 percent, official data showed on Thursday, creating more room for policy easing to support economic growth.
Economists polled by Reuters had forecast inflation to ease to 1.7 percent in July.
The National Bureau of Statistics said China's producer price index dropped 2.9 percent in July from a year earlier, which compared to forecasts for a 2.5 percent decline.
It marked the fifth straight month of producer price deflation, hurting corporate profits and underpinning expectations that consumer inflation will stay tamed in the coming months.
The central bank is widely expected to ease policy further, having cut interest rates twice since June and trimmed banks' required reserves three times since last November.