China's central bank cut its benchmark lending rate by a quarter of a percentage point to 6.31 per cent on Thursday, the first time Beijing has seen the need to stimulate its economy since 2008.
Chinese economic growth has been one of the pillars of the global economy in recent years, so the move boosted sentiment in financial markets worldwide while also underscoring that not even fast-growing China is immune to a global economic slowdown.
China's GDP fell to a nearly three-year low of 8.1 per cent in the first quarter and April factory output grew at its slowest rate since the 2008 crisis.
"The changes indicate mounting concern in Beijing over slowdown of growth," said Credit Agricole CIB economist Dariusz Kowalczyk in a report.
The rate cut is the strongest sign yet that authorities in Beijing are determined to avoid a sharp slowdown. Though significant, China's leaders are moving cautiously after their huge stimulus in response to the 2008 financial crisis fuelled inflation and a wasteful building boom.
Beijing tends to use small changes as a signal to banks, companies and consumers that it approves of more borrowing.
"The biggest impact of the move is likely to be on sentiment, both among businesses and consumers domestically" by showing Beijing is "bringing out the big guns to support growth," Kowalczyk said.