China’s central bank surprised global markets yesterday by cutting interest rates for the first time since 2008, a clear signal of its determination to stimulate the second-largest economy.

China’s economic growth slowed to 8.1 per cent in the first quarter, down from 9.2 per cent in 2011 and 10.4 per cent in 2010, and recent data showed the economy was on track for an even sharper deceleration. “Cutting the interest rate definitely shows that they are concerned about downside risks to the economy,” said Ken Peng, an economist with BNP Paribas.

The unexpected 25 basis point cut in the benchmark one-year lending rate, to 6.31 per cent, added fuel to the recent rally in financial markets, with investors hopeful that China would boost the flagging global economy. “I was surprised, but it’s very positive,” said Kristoffer Stensrud, an emerging markets fund manager at Skagen in Norway. “The Chinese authorities have been slightly worried about Europe of late?.?.?.but they’re taking responsibility for the global economy.”