China's producer price index (PPI) posted its steepest fall in more than two years in December amid a slump in global oil prices and weak domestic demand.

The factory gate price, which measures inflation at the wholesale level, dropped 3.3 percent year on year in December, the National Bureau of Statistics (NBS) said on Friday.

PPI dropped 2.7 percent in November, 2.2 percent in October, 1.8 percent in September and 1.2 percent in August.

On a monthly basis, PPI contracted 0.6 percent in December, a slight acceleration from November's 0.5 percent fall.

Yu Qiumei, a senior statistician with NBS, attributed the drop to the lower prices of refined oil; oil and natural gas; and chemicals, which contributed to a combined 0.4 percentage point fall in last month's PPI reading.

In 2014, the country's PPI fell 1.9 percent year on year.

China's consumer prices grew 2 percent in 2014 from a year earlier, well below the government's 3.5-percent target set for the year.