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China reduces interest rates for first time since 2008

China has cut borrowing costs for the first time since 2008 and loosened controls on banks’ lending and deposit rates, stepping up efforts to combat a deepening slowdown as Europe’s debt crisis threatens global growth.

People’s Bank of China said in a statement

The one year lending rate declines by a quarter percentage point to 6.31%. The one year deposit rate drops the same amount, to 3.25%

Banks can offer a 20% discount to the key lending rate, up from a previous 10%. Lenders will for the first time be able to offer savers deposit rates that are up to 10% higher than the benchmark.

In China, the rate move signals policy makers’ concern at weakness in demand for loans. The move, before China reports inflation, investment and output figures, may signal that the economy is weaker than the government anticipated.

Policy makers across the globe are also girding for a deeper impact from Europe’s woes, with Australia and Brazil also lowering rates in the past eight days.

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