By Jonathan Davies

China's rate of inflation slowed to its lowest level in five years in September, fuelling speculation that the world's second largest economy is slowing down.

Inflation as measured by the Consumers Prices Index (CPI) was 1.6% in September, down from 2% in August and down on expectations of 1.7%.

Various economic data released this year has indicated that China, which has been the world's fastest growing economy by some margin, is showing signs of slowing down. But there was more positive news earlier this week, with the country reporting a trade surplus of $31bn (£20bn).

China's annual target for inflation is 3.5%, leaving the actual figure lagging behind. It has prompted questions as to whether the Chinese government will step in to stimulate the economy.

Tim Condon from ING said: "Everything I'm hearing from the authorities is they feel the economy is broadly in a good shape and not needing broad assistance that would come from a deposit rate cut or an RRR [reserve requirement ratio] cut."

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