Within CPI, overall food prices dropped last month by 3.2 per cent, year on year, while pork prices, which have a high weighting in China’s CPI basket, fell by 22 per cent, compared with a year-on-year fall of 17.9 per cent in August.

Services prices, meanwhile, rose by 1.3 per cent, in September compared with a year earlier.

Core inflation, which receives more attention from policymakers as it excludes volatile food and energy prices, rose by 0.8 per cent last month, following 0.8 per cent growth in August.

“This suggests that China’s low inflation rate is not primarily due to domestic weakness,” said Capital Economics. “Instead, it appears to be related to excess capacity in industry.”

CPI inflation at zero indicates the deflationary pressure in China is still a real risk to the economy, said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.

“The recovery of domestic demand is not strong, without a significant boost from fiscal support. The damage from the property sector slowdown on consumer confidence continues to weigh on household demand,” Zhang said.

Meanwhile, China’s producer price index (PPI) – which reflects the prices that factories charge wholesalers for products – fell by 2.5 per cent in September, narrowing from a fall of 3 per cent in August. The indicator has fallen for 12 months in a row.

Foreign tourism in China struggles to hit pre-pandemic levels

Wind had predicted a PPI fall of 2.4 per cent last month.

“Even as global commodity prices could pick up, China’s deleveraging drive will remain a big deflationary factor,” said Xu Tianchen, an economist with The Economist Intelligence Unit (EIU).

“With debt reduction being prioritised at the moment, fiscally strained governments at local levels are required to cut back on spending, and that will amplify the existing demand shortfall in the economy and exert a drag on prices.”

But as travel enthusiasm wanes along with the end-of-summer season, Zheshang Securities said last week that there had been a slowdown in the development of the cultural and tourism market, while the average hotel prices in Beijing and Shanghai were facing downward pressure.

Overall, though, they expect that core inflation will show an upwards trend in the future as the economy stabilises.

“The price linkage between China and the world is weak, which means the country is somewhat immune to the recent global inflationary pressure caused by an uptick in food and energy prices,” the EIU’s Xu said.

“Although the travel boom this year pushed up tourism prices, it has fallen short of neutralising the price weaknesses elsewhere, such as with food and cars.”

China property crisis: Beijing helps small banks, moves to prevent contagion

Some analysts have also warned that sluggish demand will haunt China’s underpowered economic recovery.

But China’s deputy central bank governor, Liu Guoqiang, denied the deflation claims in July, and said consumer inflation was expected to rise from August, to around 1 per cent by the end of the year.

“Deflation concerns should continue to ease in the coming months,” Capital Economics said, adding that the headline PPI inflation is likely to remain negative for the rest of the year, but factory-gate deflation will become less severe.

“Base effects from food and energy should also contribute to an increase in headline CPI early next year, which we think will rise over the coming months and average around 1 per cent in 2024 and 2025.”