The slowdown comes as authorities have been seeking to boost domestic activity and shore up China's ailing property sector, with officials on Saturday announcing plans for a significant fiscal stimulus package.
The consumer price index (CPI), a key measure of inflation, rose 0.4 percent year-on-year in September, down from the 0.6 percent recorded in August, the National Bureau of Statistics (NBS) said.
The figure came in below the 0.6 percent forecast in a Bloomberg survey of economists.
August's figure, the highest level since February, had raised hopes that consumer confidence may be picking up.
While many major Western economies have been grappling with the threat of high inflation, China has instead been battling low or negative prices.
At the end of 2023, the country sank into deflation for four months, with the sharpest contraction in consumer prices in 14 years in January.
The NBS also announced Sunday that factory-gate prices slid 2.8 percent year-on-year, extending a deflationary run that has lasted since late 2022. The figure was down from the 1.8 percent decline recorded in August.
In recent weeks, Chinese policymakers have unveiled a string of measures in a bid to stimulate activity and spur household consumption.
On Saturday, China's finance minister paved the way for the country's largest economic support package in years.
Lan Fo'an said at a press conference that the country would issue special bonds to bolster banks, signalling an impending spending spree to shore up the property market and ease local government debt.
The plan is part of a series of actions undertaken by Beijing to draw a line under a years-long property sector crisis and chronically low consumption that has plagued the economy.
Also on Saturday, China's top banks said they would lower interest rates on existing mortgages from October 25.
Officials have said that Beijing's annual economic growth target of around five percent is still within reach.
But many experts consider that ambitious as a property sector crisis and high youth unemployment continue to complicate efforts to achieve a full post-pandemic recovery.
China tees up fresh spending to boost ailing economy
Beijing (AFP) Oct 12, 2024 -
China said Saturday it would issue special bonds to help its sputtering economy, signalling a spending spree to bolster banks, shore up the property market and ease local government debt as part of one of its biggest support packages in years.
The plan is part of a series of actions undertaken by Beijing to draw a line under a years-long property sector crisis and chronically low consumption that has plagued the world's second biggest economy.
Beijing's planned special bonds are aimed at boosting the capital available to banks -- part of a push to get them lending in the hopes of firing up sluggish consumer spending.
China is also preparing to allow local governments to borrow more to fund the acquisition of unused land for development, aimed at pulling the property market out of a prolonged slump.
No figures were provided on the planned special bonds announced at a highly anticipated press conference by Finance Minister Lan Fo'an and other officials, following a series of steps launched in recent weeks that have included interest rate cuts and liquidity for banks.
But Lan said China still has room "to issue debts and increase the deficit" to fund the new measures.
Officials have been battling to reverse China's slowdown and achieve a growth target of five percent this year -- enviable for many Western countries but a far cry from the double-digit expansion that for years boosted the Asian giant.
On Saturday, Lan said Beijing was "accelerating the use of additional treasury bonds, and ultra-long-term special treasury bonds are also being issued for use".
"In the next three months, a total of 2.3 trillion yuan of special bond funds can be arranged for use in various places," he added.
On top of that, Beijing also plans to "issue special government bonds to support large state-owned commercial banks," Lan said, although he did not say how much.
Chinese authorities have been urging commercial banks to lend more and lower mortgage rates -- measures that would put more cash into the pockets of consumers.
Beijing's bonds would therefore offer banks help to shore up their capital, giving them greater leeway to lend more.
- Bonds for buildings -
Local governments will be issued special bonds enabling them to acquire unused and idle land for development, Vice Finance Minister Liao Min said.
The move would "help ease liquidity and debt pressures on local governments and real estate companies," he explained.
Beijing will also encourage the acquisition of existing commercial properties to be used as affordable housing.
However, analysts expressed frustration that Beijing had refrained from putting a number on further fiscal stimulus.
Beijing was likely "still working on the minute details of the fiscal stimulus," Heron Lim at Moody's Analytics told AFP.
"In the meantime, investors might be taking a step back until they are absolutely certain of the direction fiscal policy is taking."
On the streets of Beijing on Saturday though, those who spoke to AFP were largely optimistic.
"Everyone has been paying close attention to this meeting, especially since the stock market has recently been experiencing a downward trend," said Quan Sheng, a 41-year-old who works in IT.
"I believe this is definitely positive news... This provides confidence for investors, who believe that the stock market can gradually strengthen," he added.
- 'Lack of forward guidance' -
China's economic uncertainty is fuelling a vicious cycle that has kept consumption stubbornly low.
On Saturday, "notably absent was any mention of large-scale handouts to consumers", said Capital Economics' Julian Evans-Pritchard.
"The lack of forward guidance on the scale of next year's budget deficit means it is still difficult to judge how large and long-lasting the fiscal boost will be," he added.
In recent weeks, Chinese policymakers have unveiled a string of stimulus measures including a suite of rate cuts and a loosening of rules on buying homes, but economists have warned more action is needed to pull the economy out of its slump for good.
Earlier on Saturday, China's top banks said they would cut lower interest rates on existing mortgages from October 25, following a government call for the action.
"Except for second mortgages in Beijing, Shanghai, Shenzhen and some other regions, the interest rates on other eligible mortgages will be adjusted" to no less than 30 basis points below the prime lending rate, the central bank's benchmark rate for mortgages, state broadcaster CCTV said.
CCTV reported that major banks had announced that they would make the adjustments "in batches".
The People's Bank of China last month requested that commercial banks lower such rates by October 31.
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