China's inflation grows 2.7% in June

Despite the soft inflation and slowing economic growth, the government is not expected to change its stance on tightening, as it is striving to tackle overcapacity and contain runaway credit expansion.

"Inflation is not this year's concern. The focus will be dealing with overcapacity and reform," said Wang Jun, vice director of the Department of Consultancy at the China Center for International Economic Exchanges, a think tank headed by former Premier Zeng Peiyan.

China's economic growth eased to 7.8 percent last year, the slowest since 1999. It unexpectedly slowed to 7.7 percent in the first quarter of 2013.

Data for the second quarter will be unveiled on July 15. Economists have predicted that China's economic growth could decline to 7.5 percent, close to the government's target for the year.

The government, however, has been reluctant to boost the economy through monetary easing or government-led investment. During the 2008 global financial crisis, the government launched a 4-trillion yuan stimulus program to protect China from economic meltdowns elsewhere.

"The government will not tighten its monetary policy due to pressure on economic growth. In one aspect, import prices will drop as the appreciation of the yuan slows down, which will ease inflation pressure. In addition, the country's manufacturing sector has been destocking in response to the decelerating economy," Zhang said.

Premier Li Keqiang has been calling for economic upgrades and reforms since taking office in March.

The new administration's greater tolerance for economic slowdowns prompted Barclays to coin the word "Likonomics" to describe China's current economic policy, which features zero stimulus, deleveraging and structural reforms.

"The government is paying less attention to inflation compared with the past few years. It is focusing more on proper economic growth that can leave room for reform," said Zhuang Jian, an economist at the Asian Development Bank.