Policy loosening 'likely' to prompt economic growth

The PPI declined 1.63 percent in February and 1.64 percent in January.

"We are struggling just as most small and medium-sized companies saw thin profits due to the slow recovery of the slump in Europe," said Guo Junwei, owner of a clothes factory in Taizhou, Zhejiang province.

Li Daokui, an economics professor at Tsinghua University and a former adviser to the central bank, said inflationary pressure won't be high in the short term and the downside risk of economic growth should be addressed.

"We must be alert to a rapid slowdown," Li said, adding that he foresees a macroeconomic policy adjustment in the second quarter to support growth.

Xiang Songzuo, chief economist at Agricultural Bank of China, said the manufacturing industry is particularly fragile.

"The sector has not shown obvious signs of recovery, while excessive production and sluggish demand are taking their toll," Xiang said.

"The policy focus should move from containing inflation to shoring up the real economy," Xiang said.

On Tuesday, the Asian Development Bank predicted GDP growth of 8.2 percent in China this year, up from 7.8 percent in 2012, boosted by public spending and consumption.

The bank said GDP growth may slow to 8 percent in 2014, as the government may be keen on solving environmental pollution and narrowing the income gap.