Deflation: Why falling prices in China raise concerns

China's economy has slipped into deflation as consumer prices declined in July for the first time in more than two years.

The official consumer price index, a measure of inflation, fell by 0.3% last month from a year earlier.

Analysts said this increases pressure on the government to revive demand in the world's second largest economy.

This follows weak import and export data, which raised questions about the pace of China's post-pandemic recovery.

The country is also tackling ballooning local government debt and challenges in the housing market. Youth unemployment, which is at a record high, is also being closely watched as a record 11.58 million university graduates are expected to enter the Chinese job market this year.

Falling prices make it harder for China to lower its debt - and all the challenges which stem from that, such as a slower rate of growth, analysts said.