The CPI, a major gauge of inflation, registered a year-on-year decrease of 1.6% in February, according to data released by China's National Statistics Bureau on Tuesday morning.

The continuous decline of CPI reading has lasted ten months since the reading reached its peak of 8.7% last February. The figure in January reached 1%.

Another inflation indicator, the producer price index (PPI), continued its declining trend to -4.5% in February, compared to a year earlier. The figure slid 1.2 percentage points from the January level, which was also negative.

Despite that the CPI and PPI readings both slid, the Bureau denied in a statement that those were signs of deflation. The Bureau said one major factor that contributed to the huge drop in the year-on-year CPI reading was last year's abnormal price spike.

It reasoned that February last year China experienced a devastiting snow storm and prices soared to a level not seen before, resulting in a CPI peak; thus the basis for comparison was atypical.

However, Dong Xian'an, a senior analyst of China Southwest Securities, believed the deflationary pressure had set in and would continue well into August before the CPI reading recovered to a positive figure.

To ward off deflationary pressure and spur economic recovery depended largely on subsequent monetary measures and their implementation by the government, said most economists the Economic Observer interviewed. Thus, credit expansion and money supply figures were becoming the key to watch.