China Cuts Lending Rate as Its Economic Growth Slows HONG KONG - Faced with a sharply slowing economy, weak exports and faltering investment, China unexpectedly announced late Thursday that it would cut interest rates by a quarter of a percentage point. The action, by the People's Bank of China, represents the strongest measure by the Chinese government to counteract an economic malaise that has infected Europe and the United States and now seems to be affecting China faster and more extensively than most policy makers or private economists had anticipated. Lowering interest rates makes it easier for companies and individuals to borrow money and start spending again. The People's Bank of China announced that the regulated one-year corporate lending rate would drop to 6.31 percent, from 6.56 percent, effective Friday. In a parallel move that will amplify the practical effect of the rate cut, the central bank also said that commercial banks would be allowed to further reduce the lending rate by one-fifth for good customers; the previous discount had been one-tenth. Banks will also pay less interest on deposits, however, which could hurt savers. The one-year deposit rate will drop to 3.25 percent from 3.5 percent, the People's Bank of China said on its Web site. The spreading economic distress in China is readily apparent these days, from the street markets of export-dependent coastal provinces, where factories are closing, to the construction sites of investment-hungry inland provinces, where most developers have switched from three shifts a day to a single shift. In Qingxi, an export-dependent township of Dongguan in southeastern China, a wave of bankruptcies among exporters of car stereo components has resulted in mass layoffs, with a ripple effect of falling sales at local retailers. In interviews late Thursday morning in Qingzi, a range of business people complained that the economy now is even worse than in early 2009, when factories closed and millions of migrant workers lost their jobs during the early stages of the global financial crisis. "Nobody is spending," complained Yu Jia, the owner of a general store that sells everything from tofu to laundry detergent. Her sales have fallen by nearly a third since Chinese New Year in late January, she said.