China's April PPI down 2.6%

Ding Shuang, senior economist with Citigroup, said that the more-than-expected PPI drop was largely attributed to price declines of staple commodities.

"The drop highlighted weak domestic demand and it also suggested a rising risk of the Chinese manufacturing sector entering a period of deflation," Ding said.

Hu Yuexiao, economic analyst from Shanghai Securities, said that the PPI drop reflected the excess production capacity of China's manufacturing sector.

"As demand from Chinese companies shrinks, the aggregate demand of the economy will be less," Hu added.

Lian Ping, chief economist with the Bank of Communications, said that the PPI would gradually go up within the year but the positive growth in PPI might not be seen until the third quarter.