Chinese industrial production weakened sharply in April as investment slowed to its lowest level in nearly a decade, showing an economy that is surprisingly vulnerable to a global slowdown and a credit crunch at home.

Industrial production rose by 9.3 per cent in April, the lowest level since May 2009, while retail sales surprised the market by slowing to a 14.1 per cent rise, the lowest level in 14 months.

Fixed asset investment rose by 20.2 per cent in the first four months of the year, the slowest level since December 2002.

"It's obviously much weaker than anyone had expected. 9.3 per cent for manufacturing is very telling and it shows that the economy is decelerating at a faster rate," said Ken Peng, economist at BNP Paribas in Beijing. "It points to the fact that domestic demand is weak and it requires more policy help."

Annual consumer inflation moderated to 3.4 per cent in April from 3.6 per cent in March, while food prices - which are of most concern for China's people and policymakers - rose by 7 per cent, compared to 7.5 per cent in March.

Easing inflation potentially gives Beijing more scope to loosen policy to help the economy rebound from a first-quarter slowdown in growth. Disappointing trade numbers yesterday heightened jitters about a slowdown in the global economy.

China's inflation has fallen steadily from a three-year peak of 6.5 per cent in July 2011 in response to a series of policy tightening steps and weakening economic activity.

Pork prices in particular have moderated, after inflation levels of over 50 per cent last summer. Non-food inflation cooled to 1.7 per cent.

Slowing growth has weighed on demand from China's manufacturing sector, which struggles with overcapacity in many sectors. April's Producer Price Index (PPI) dropped by 0.7 per cent after a 0.3 per cent drop in March, overshooting expectations.

Retreating inflation has led investors to speculate that China may cut further the amount of cash it requires banks to hold as reserves to encourage them to lend more to cash-strapped firms.

China has cut the required reserve ratio by 100 basis points from a record high of 21.5 per cent in two steps, the last a 50 bp cut in February.

Trade data yesterday highlighted the risks to China's factory-focused economy of a fresh downturn in demand, with annual export growth of just 4.9 per cent in April, below a forecast of 8.5 per cent, while headline import growth stalled.

Continued softness in domestic demand is exacerbated by the impact of financial turmoil in Europe, a major export market.