Producer prices also fell by 2.3% year-on-year, marking a prolonged downturn that has impacted manufacturer profitability, although the rate of decline has slowed since August.

The decline in producer prices and consumer prices reflects persistent challenges such as weak domestic demand, a sluggish housing market, and ongoing trade tensions with the U.S.

Despite these pressures, inflation is forecasted to rise in October, boosted temporarily by the Golden Week holiday, which could stimulate consumption and economic activity.

The Chinese government is expected to introduce further measures to support economic growth and stabilize inflation, especially as trade tensions and external pressures continue to pose risks.

Experts cite an unrecovered housing sector and a weak labor market as major factors contributing to fragile inflation stabilization.

The IMF has highlighted weak domestic demand and suggested fiscal measures targeting social spending and property to combat deflation.

China's consumer price index (CPI) declined by 0.3% year-on-year in September, signaling ongoing deflationary pressures despite a slight improvement from August, with month-on-month prices rising just 0.1%.

Broader economic challenges, including a prolonged real estate crisis, high youth unemployment, and sluggish post-COVID-19 consumption, are weighing heavily on consumer sentiment.

Private consumption remains subdued, prompting expectations of additional government support to counter persistent deflation.

Meanwhile, the core CPI, which excludes volatile food and energy prices, rose by 1% year-on-year in September, reaching its highest level since February 2024 and signaling some underlying price stability.

Trade tensions between the U.S. and China are escalating, with the U.S. considering a 100% tariff on Chinese goods from November 1, and China imposing stricter export controls on rare earth metals, further complicating economic relations.

Despite recent data showing a surge in September, China's overall economic growth continues to slow amid a property market downturn and external pressures from rising U.S. trade tariffs.