Official figures show that China's inflation rate slowed sharply in October as food prices fell. The figures fuelled expectations the government will relax its grip on bank lending and property purchases.
The country's consumer price index rose 5.5% year-on-year, the National Bureau of Statistics said. This marked the slowest pace since May when the inflation rate hit the same level.
Food prices, a major part of the basket of goods used to calculate inflation, fell 0.2% in October from September as the cost of vegetables and eggs dropped.
China's inflation rate has slowed for three months in a row after peaking at 6.5% - the highest level in more than three years - in July as policymakers continue to clamp down on bank lending and property purchases. But it is still higher than the government's annual target of 4%.
China, anxious about inflation's potential to trigger social unrest, has been pulling on a variety of levers to curb prices in the past year, including restricting the amount of money banks can lend and hiking interest rates.
Chinese Premier Wen Jiabao said consumer prices had fallen "noticeably" since October but he warned "difficulties remain", according to a Xinhua report posted on the government's website.
Despite lingering concerns over inflation, analysts expect authorities to ease credit restrictions in the coming months as Europe's debt crisis squeezes demand for Chinese exports and small businesses struggle to get financing.
