Figures from the National Bureau of Statistics released on Sunday showed under-target consumer inflation, with the consumer price index (CPI) rising 1.9 percent in June from a year ago primarily due to lower food prices. Economists had forecast a 1.8 percent rise, after the country logged a 2.0 percent increase in May.
With the CPI under the official 3 percent inflation target, thePeople's Bank of China (PBOC) will have "more leeway to stimulate the economy" to help it achieve its 6.5 percent growth target, said Hao Zhou, Commerzbank's senior emerging market economist for Asia.
"It makes more sense for China to cut interest rates," Zhou told CNBC's "Squawk Box" on Monday.
"China is talking about supply-side reforms but I think China needs to stimulate on the demand side," he added.