China said on Thursday that it will cut interest rates for the first time in more than three years, amid growing concerns over a growth slowdown in the world's second largest economy.
The People's Bank of China, the central bank, will from Friday cut the benchmark one-year lending rate by 0.25 percentage points while the one-year deposit rate will fall by the same amount, according to a statement.
This marks the first interest rate cut since December 2008. The move had widely been expected following dismal economic data in April and weaker manufacturing activity in May.
It comes hot on the heels of last month's cut in the amount of money banks are required to keep in reserves – the third since December last year – which was also aimed at pumping more funds into the slowing economy.
China's economy grew an annual 8.1 percent in the first quarter of 2012 – its slowest pace in nearly three years.
The government has reduced its economic growth target for this year to just 7.5 percent, down from actual growth of 9.2 percent last year and 10.4 percent in 2010.
Following the interest rate cut, the one-year yuan lending rate will stand at 6.31 percent and the one-year yuan deposit rate will be 3.25 percent, Xinhua said.
China had previously hiked interest rates five times since October 2010, in an effort to control surging inflation due to worries of social unrest.