Yi pointed to last year’s high oil and food prices, the base effect to blame for the very low consumer inflation in April and May, and also the lag in consumption after China’s reopening.

“China has strong economic resilience, big [growth] potential and ample policy space,” he said.

“[We] should have confidence and patience for China’s steady economic growth.”

China’s producer price index (PPI), meanwhile, also fell short of expectations and tumbled by 4.6 per cent in May compared to the previous year, hitting its lowest level since February 2016, as the prices factories charge wholesalers for their products dwindled.

The weak price data fuelled market concerns about weak demand and also Beijing’s reluctance for strong stimulus to help the economy.

The ongoing debate over deflation risks is also a test to Beijing’s policymakers, who are increasingly being urged to roll out stronger monetary support, including policy rate cuts and financing support, to help shore up the economy.

Yi said the PBOC will enhance countercyclical adjustments and use a variety of monetary tools to maintain reasonably ample liquidity and appropriate credit supply, while also lowering the borrowing costs of market entities.

Larry Hu, chief China economist at Macquarie Capital, said more policy support is needed to boost market confidence.

“That is the only game changer,” he said.

As China’s economic rebound falls short of market expectations, Hu expects Beijing to release a robust wave of stimulus measures, including boosting consumer spending.

The slight rise in the CPI was largely supported by a pickup of food prices, which rose by 1 per cent year on year as fruit prices surged by 3.4 per cent.

But China’s CPI is, Hu added, probably at the bottom and may start to climb in the second half of the year.

China’s core consumer inflation rate, excluding the volatile prices of food and energy, rose by 0.6 per cent in May compared with a year earlier, down from 0.7 per cent growth in April.

“The risk of deflation is still weighing on the economy,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.

“Recent economic indicators send consistent signals that the economy is cooling. The government has not sent a clear signal on potential policy stimulus.”

It is widely expected that Beijing will review its policies in July, when the Politburo headed by President Xi Jinping will make decisions upon the release of the second quarter gross domestic product data.

“We doubt inflation will become a barrier to increased policy support. Instead, the main constraint facing policymakers has to do with financial risks,” said economists at Capital Economics.

4 takeaways from China’s May trade data as exports tumbled

The 3 per cent CPI control target set by Beijing at the beginning of the year will not be tested, but more stimulative policies are likely to be introduced to warm the gradually chilling economy, such as bringing more cash flow to the market, they added.

“We expect the [central bank] to ease policy somewhat in the near-term but that, in order to limit the impact on bank margins, it will favour tools such as window guidance and [reserve requirement ratio] reductions instead of policy rate cuts,” the economists at Capital Economics said.