Japan-based Nomura Securities also said in a note that falling global commodity prices and worsening overcapacity in upstream industries due to the ongoing property market correction could be major factors contributing to the PPI deflation.

Chang Jian, Barclays chief China economist, said in a note that today's data confirmed sluggish domestic demand and rising disinflationary risks.

"We expect continued PPI deflation through 2015 and the government's latest 'going out' efforts to support Asian infrastructure investment offer some solution to the domestic overcapacity issue," she said.

Policy implications

Qu Hongbin, HSBC chief China economist, maintained that the momentum of low inflation growth is likely to persist in the coming months, as price growth weakened in almost all sub-categories of CPI and PPI.

The low inflation reading also confirmed messages from the HSBC October PMI that the Chinese economy suffers from insufficient demand, especially on the industrial front, he wrote in a note.

"Risks of deflation persist, and growth still faces significant downward pressure."

The low inflation reading, together with current low capacity utilization and excessive inventories, all indicate that the world's second-largest economy is operating below its potential, he said.

"Targeted (monetary) easing aside, (a) rate cut is still a policy option on the table in the coming quarters," Qu said.

Chang Jian agreed. October's subdued inflation provides room for more easing from the central bank, the People's Bank of China, she said.

But broad-based monetary easing will more likely be triggered by more disappointing growth numbers, which Chang expects to come in the coming months.

Chang also lowered her CPI inflation forecast for 2014 by 20 basic points to 2.1 percent "in view of continued downside surprises to CPI inflation."

As lower oil prices continue to filter through to CPI and PPI, CICC's Liu expects year-on-year CPI growth to remain low in November and PPI deflation to worsen.

"The pressure for monetary policy easing will increase," he added.

China's August PPI down 1.2%	Economists upbeat on China