China's low inflation sparks fear of deflation

China's consumer inflation fell to an 18-month low in April and factory-gate prices declined further, underlining sluggish domestic demand and raising concerns about deflation.

The consumer price index rose 1.8 percent in April from a year earlier, the National Bureau of Statistics said on Friday. The government's inflation ceiling is 3.5 percent for the year and economists expected price rises of 2 percent. Annual inflation was 2.4 percent in March.

Inflation is too low for an economy that expanded at an annual rate of 7 to 8 percent, and continuously low CPI starts ringing alarms of deflation, Chen Hufei, an economist with Bank of Communications Co Ltd, said.