China's annual inflation eased to 4.1 percent December, the lowest level in 15 months, giving the government more room to tilt economic policy away from restraining prices and towards supporting sagging growth.
The annual rate of headline consumer price inflation was slightly ahead of expectations of 4.0 in the benchmark Reuters poll of economists, but below November's 4.2 percent, reinforcing the view of many that the central bank is poised to ease monetary policy.
The month-on-month CPI was lower than the same month in the past few years. That means inflation is no longer a main concern for policymakers, said Zhiwei Zhang, an economist at Nomura, in Hong Kong. China is more worried about an economic slowdown now and will continue the policy easing cycle.
Beijing cut the ratio of cash banks are required to hold as reserves by 50 basis points in November to 21 percent, the first such cut in three years, in a move to boost corporate credit lines and help firms counter faltering demand at home and abroad.
The December figures was the closest that inflation came in 2011 to hitting the official target of 4 percent for the year, leaving the average rate above 5 percent.
That's still too hot for China's conservative policymakers, who are reluctant to shift policy settings too quickly towards all-out growth mode and argue that fine-tuning is all that is required to keep the economy on a stable expansion path.
But evidence of slower economic growth is mounting, even while inflation is still not yet as tame as Beijing might like.
The country's customs agency said on Tuesday that China's exports and imports grew at their slowest pace in more than two years in December, fresh evidence of cooling domestic and global economic conditions that could push Beijing towards a more pro-growth policy stance.
China's annual economic growth in the fourth quarter of 2011 may have slowed to 8.7 percent from 9.1 percent in Q3, according to the latest Reuters poll.
The National Bureau of Statistics is due to publish GDP and other economic activity data at 0200 GMT on January 17.
In month-on-month terms, the consumer price index rose 0.3 percent in December from November, after a 0.2 percent fall in November. The figure is not seasonally adjusted.
The latest data also showed that food prices, a major source of inflationary pressure in China, rose 9.1 percent in December from a year earlier, compared with an increase of 8.8 percent in the year to November.
(Reporting by Aileen Wang and Nick Edwards; Editing by Alex Richardson)