Despite concerns over deflationary pressure and lackluster business sentiment, they said the nation's economic activity is moving in the right direction amid a raft of supportive measures implemented in recent months, and economic growth will likely pick up gradually in the coming months.

"Internationalization and outward investment are valid measures to balance temporary market imbalances and corrections and combat deflationary patterns.

To avoid a prolonged period of deflationary expectations, Beirne of the banking institute said that China must implement growth-enhancing policies that boost aggregate demand, support domestic consumption and encourage investment in productive sectors.

However, it would be wrong to describe China as being in the grip of a deflationary spiral.

Underlying demand is still growing and we haven't seen the emergence of a deflationary mindset among producers and consumers.

"Thanks to well-calibrated and targeted policies and a gradual recovery in external demand, China's economy should continue to regain its vitality through 2023 and pick up moderately in 2024, which does not indicate deflationary outcomes, Khor said.

However, it would be wrong to describe China as being in the grip of a deflationary spiral," said Frederic Neumann, chief Asia economist and co-head of Global Research Asia at HSBC.

"Underlying demand is still growing and we haven't seen the emergence of a deflationary mindset among producers and consumers," Neumann said.

There were lessons before, such as the five-year-long depression and deflationary period from 1998 to 2002.

China's economy is showing signs of a rebound with a gradual improvement in demand, warming economic activity and an easing of deflationary pressure, experts and executives said.

When it comes to concerns over deflationary risks after the relatively low inflation figures in July, they said China is not entering a period of deflation, and consumer prices will likely pick up gradually from August with steady economic recovery anticipated amid a raft of pro-growth policies taking effect before year-end.

In their blues, they try to create a sentiment of gloom and doom about the Chinese economy and send it down across the wider global market, with such depressing lyrics as "systemic crisis," a "ticking time bomb," or even a "deflationary trap.

Despite challenges at home and from abroad, China's economy has sustained growth momentum with market demand and business confidence moving on a recovery trajectory, laying no ground for deflationary risk, experts have said.

Liu Guoqiang, deputy governor of the People's Bank of China, said in mid-July in response to the country's softening price growth that "we don't see deflation at present and there will not be a deflationary risk in the second half of this year either.

"So, there is no deflation right now and there will not be deflationary risks in the second half of the year. "

Wang added that Caixin's manufacturing PMI for June also points to issues such as an increasingly dire job market, rising deflationary pressure and waning optimism.

The authorities should remain vigilant to prevent economic sluggishness, a deflationary mindset and pessimistic expectations from reinforcing one another and take decisive measures to reverse the economic decline, bolster social expectations and dispel deflationary fears.

At such a time, deleveraging will enter a nasty and unsustainable phase, and deflationary risks may rise sharply.

Decisive measures, forward-looking and bold actions should be taken to stem the economic downturn, reverse deflationary expectations and shore up overall consumer and business confidence.

Yu Jian, managing director of Kantar Worldpanel in China, said the price deflationary trend starting from 2020 persisted in the first quarter, but became more divergent across categories.

Defying market concerns that China could enter a deflationary period, Morgan Stanley expects the headline consumer price index to rise to 1.3 percent year-on-year in the fourth quarter.

"Currently, stabilizing employment, increasing incomes and bolstering expectations through a proactive fiscal policy should be prioritized given the dire job market and mounting deflationary pressure.

Regarding the ongoing debate about whether we are in economic recovery or whether deflation runs the risk of derailing a comeback, we clearly state that the current situation is the beginning of an economic recovery, not a deflationary cycle.

Tang said that Fitch Bohua, however, does not believe there is a serious deflationary trend in China's economy, considering the CPI has not fallen into continuous negative territory, and the stable performance of core CPI.

Current prices and the economic situation are clearly different from a deflationary period.

While some experts worry that disinflationary pressure remains sizable, Zhou said China will not likely see deflationary risks in the coming months, and the country will continue to keep prices stable and controllable this year.

Yi Gang, governor of the People's Bank of China, the central bank, cautioned at a forum in Shanghai earlier this month that the country should "stay on high alert against both inflationary and deflationary pressures arising from different aspects".

First, inflation indicators have fallen significantly, while deflationary pressure has gradually increased.

Citing the figures, Long Chaocan, an investment consultant with China Galaxy Securities Co Ltd, said that due to a relatively high comparison base last year and deflationary factors, infrastructure investment — which seemed flat compared to previous quarters this year — was actually strong in the third quarter, effectively mitigating the impact of the sluggish real estate sector.

China does not face deflationary pressures as inflation may normalize as the Chinese economy continues to recover from the pandemic while food and fuel prices are likely to increase, the International Monetary Fund said on Wednesday.

It is in fact questionable whether China's current economic position can be classified as one that is deflationary as there is no clear definition of deflation and the CPI has only been negative for one month.

Deflationary pressure is thus mitigated, increasing inflationary pressure.

Yi said cutting rates is a method to tackle deflationary risks, however, prices in China are now at a moderate level, given the 2.7 percent consumer price index in May and June.