The CPI came in at 2.1 percent, the National Bureau of Statistics (NBS) said, down from 3.2 percent in February when prices spiked during the Lunar New Year holiday.
A year ago, China was experiencing an annual inflation rate of almost four percent.
Food prices remained a leading driver of inflation in March, rising 2.7 percent year on year, although easing from a six percent increase in February.
China has set its inflation target for this year of 3.5 percent.
Separately, Chinese stocks slumped to their lowest level in 2013 on Monday, following a fresh bird flu scare.
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