Update | China cuts interest rates for third time since November as economy sputters

Beijing slashed interest rates for a second time this year in a bid to spur the slowing economy and cut fundraising costs for cash-starved businesses.

The People's Bank of China announced on Sunday that the one-year benchmark lending rate would be cut by 25 basis points to 5.1 per cent, while the deposit rate would also go down 25 basis points to 2.25 per cent. The new rates take effect today.

Lower lending and borrowing rates have been expected amid mounting concern about job losses and business collapses, after the central bank said last month it would flexibly use monetary tools to maintain appropriate liquidity in the economy.

"It's important for China to sustain relatively fast economic growth due to the demands for creating new jobs," said economics professor Zhao Quanmin of the China Executive Leadership Academy in Pudong.

China's economy slowed from 7.4 per cent last year to 7 per cent in this year's first quarter, with analysts expecting growth to fall below this year's targeted 7 per cent. Exports fell 15 per cent in March before a further 6.4 per cent decline last month.

The rate cuts also came amid concern over growing deflationary pressures, as producers' prices fell for the 37th consecutive month by 4.6 per cent in April and consumer price inflation was only 1.5 per cent.