Further monetary easing is likely as the real estate sector deteriorates and deflation intensifies in China, especially at the wholesale level, economists said.

Average housing prices in the primary market in 70 major cities monitored by the National Bureau of Statistics fell 5 percent year-on-year last month, compared with the 4.3 percent drop in December.

The average new home price slid 0.4 percent month-on-month, the ninth consecutive month of declines, showing that the recent reduction in banks' reserve requirement ratio did not increase liquidity in the real estate market, according to experts.

The cost of funds for property developers and investors is still high, and the government is likely to loosen property-related policies and ease credit in the coming months to revive the real estate market, said Xia Dan, a researcher at Bank of Communications Co Ltd.

More signs point to further monetary easing to stabilize economic growth. Consumer price inflation, which dipped to a five-year low of 0.8 percent in January, may remain below 1 percent this month despite price increases during the Spring Festival holiday, economists said.

The Producer Price Index continued to weaken, declining sharply in January to a five-year low with a 4.3 percent contraction as raw material prices extended their long slide. Lower input costs, combined with weak domestic demand, are depressing the prices of manufactured and consumer goods.

Deflation is the main risk for the Chinese economy now, said Jiang Chao, an analyst at Haitong International Securities Group Ltd. "The time is ripe for more interest rate cuts," said Jiang.

Wang Tao, chief China economist at UBS AG, said the next interest rate cut could come as early as March or April. She has forecast at least two more rate cuts of 50 basis points each this year to prevent real interest rates from rising too much.

Continued declines in consumer and producer prices have pushed up China's real interest rates since the fourth quarter of 2014.

"Further RRR cuts and liquidity operations may be needed to maintain steady credit growth and contain financial risks," she said.

According to the People's Bank of China, the central bank, the January new loan total increased by 11.4 percent year-on-year to 1.47 trillion yuan ($238.67 billion), compared with 697 billion yuan in December.

"This likely reflects the PBOC's window guidance at month-end to commercial banks to boost lending to support the weakening economy," said a research note from Barclays Capital. "We maintain our forecast of two 25 basis-point cuts in benchmark interest rates in the first half this year and two additional 50 basis-point cuts in the reserve requirement ratio," it said.