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Rising money market rates and bond yields indicate the People's Bank of China (PBOC) is tightening liquidity conditions, to reduce debt levels and contain credit growth, but there is little sign of a sharp turnaround in monetary policy.
Annual consumer inflation unexpectedly slowed to 3 percent in November from an eight-month high of 3.2 percent, the National Bureau of Statistics said on Monday. Analysts had expected the inflation rate to hold steady at October's level.
"Inflation will not be a big problem in the coming months and we expect monetary policy to stay neutral," said Luo Wenbo, an economist at Xiangcai Securities in Shanghai.
From a month earlier, consumer prices fell 0.1 percent, the first fall in six months and a touch weaker than market expectations they would be flat.
"While headline inflation could moderate further in December, due to a high base last year and the PBOC maintaining a tightening bias on liquidity, upward pressures on inflation remain," Jian Chang, China economist at Barclays Capital in Hong Kong, said in a research note.
Producer prices fell 1.4 percent in November from a year earlier - the 21st consecutive month of decline - versus a fall of 1.5 percent in the previous month, the bureau said. On a monthly basis, producer prices were unchanged.
Graphic - Inflation, food inflation http://link.reuters.com/waf95s
MAINTAIN GROWTH TARGET
A strong jump in exports and a run of surveys of factory and service sector activity indicate the world's second-largest economy has regained some momentum since arresting a protracted slowdown in the middle of the year.
But data on factory output, fixed-asset investment and retail sales due on Tuesday is expected to show some moderation, consistent with expectations annual growth will slow slightly in the fourth quarter from the third.
A Reuters poll in October showed annual growth was forecast to slow to 7.5 percent in the final quarter of 2013 from 7.8 percent in the September quarter. Full-year growth was forecast at 7.6 percent - the weakest in 14 years, but just ahead of the government's target of 7.5 percent.
China's leaders have said they will accept slower growth as they try to remake the economy so it is not dependent on investment and exports and instead driven by consumption, services and innovation, which they consider more sustainable.
Top government think tanks, which make policy proposals for the leadership, are debating whether the growth target should be cut to 7 percent in 2014, but the official China Securities Journal said the government would probably keep it at 7.5 percent.
"Reform is more important than growth, but that does not mean that we will allow a 'hard landing' in China's economy. We need appropriate economic growth to help maintain employment and social stability," the paper said in a front-page commentary.
"Economic growth target for 2014 is more likely to be maintained at around 7.5 percent," it said.
