China on Wednesday announced its third interest rate cut in six weeks. The move was seen as part of a widely expected new round of global rate cuts.

China will lower both one-year benchmark lending and deposit rates by 0.27 percentage points starting today, the People's Bank of China said yesterday on its Website.

The cut means the one-year deposit rate drops to 3.6 percent while the one-year lending rate decreases to 6.66 percent. The public housing fund rates were untouched.

The cut was seen as a means of shoring up the economy against pressures from the global credit crunch.

"More interest rate cuts are already expected and the timing doesn't come as a surprise either," said Lu Zhengwei, the chief economist at Industrial Bank in Shanghai.

Central Bank Governor Zhou Xiaochuan said in his report to the Standing Committee of the National People's Congress on Sunday that China must prepare for challenges brought by the global financial turmoil.

"As Governor Zhou said, the central bank is going to have more frequent communication with foreign central banks," Lu said. "It already indicated that China is likely to work with other countries to fight the °?financial crisis.

"It didn't come as a surprise that China acted first considering the broad picture," Lu said.

China joined many other countries by cutting interest rates on October 8, in a global effort to restore investor confidence.

The move failed to avert widespread losses on the world's markets, which have pushed the United States, Britain and other major economies to the brink of recession.

The PBOC marked down the long-term savings rates more than short-term savings or lending rates, giving banks some breathing space for their already-squeezed interest spreads.

Five-year savings accounts face a maximum cut of 0.45 percentage points.

"Banks are experiencing tough times with rate cuts trimming their interest spreads and easing demand for mortgages," Lu said.

(Shanghai Daily October 30, 2008)