China's consumer inflation dropped to 0.5% year-on-year in July, the lowest in six months, driven by lower food prices and slower growth in non-food costs. Producer price inflation eased to 3.5%, down from 4.1% the previous month, indicating reduced price pressures.

This inflation data led to expectations of an accommodative policy to boost economic growth. Authorities are focused on increasing infrastructure spending to address weak domestic demand, even as exports and manufacturing remain steady. Consumer and telecom stocks, including Kweichow Moutai and China Mobile, experienced gains, while some technology stocks like Zhongji Innolight faced declines due to profit booking.