By staff reporters Li Zengxin and Wang Zhen

China’s central bank, the People’s Bank of China, lowered its key one-year lending rate by 0.27 points to 6.93 percent in conjunction with cuts announced by central banks worldwide that are coordinating a fight against the global financial crisis.

Although China’s rate cut Thursday was not expected to have an immediate impact on the economy, the move signaled the Chinese government’s apparent interest in adopting a more relaxed monetary policy.

Additional policy initiatives were expected to be announced after a Chinese Communist Party (CCP) meeting scheduled for Thursday to discuss economic issues.

China’s rate cut – the second in three weeks – followed similar moves Wednesday and Thursday by the U.S. Federal Reserve, European Central Bank, Bank of England and other central banks around the world.

In addition to lowering interest rates, China announced a 0.5 percent reduction in the reserve requirement for most banks.

Analysts had mixed feelings about the Beijing’s move. Some said no visible impact on the Chinese economy could be expected for at least six months.

Ha Jiming, a chief economist with China International Capital Corp (CICC), told Caijing that the central bank’s step will have a positive impact on businesses whose economic activities are based on high leverage or high debt.

But Ha said the reduction is unlikely to impact China’s overall economic condition. With the economy on a downward slide, he said, corporate loan demands have diminished, and commercial banks have hesitated to lend while choosing to firewall risks.

Jing Ulrich, managing director of China Equities at JP Morgan, said the country’s economy is being increasingly strained by slower export growth and a tougher property market. “China’s economic challenges appear to be mounting,” she said.

Export growth decelerated to 21 percent year-on-year in August, from 26.9 percent in July. Industrial production growth moderated to 12.8 percent year-on-year in August, from 14.7 percent in July and 16 percent in June. Meanwhile, Ulrich said, the nation’s property market downturn is having a spillover effect.

A Merrill Lynch report said the rate cut should be marginally positive for a number of sectors sensitive to interest rates, including the property sector.

The latest move “is only the beginning” for the central bank, Merrill Lynch said, adding that it “expects more cuts from China.”

The report said two to three cuts of 27 basis points each, for both loan and deposit rates, could be expected from the central bank before the end of 2008. Two additional cuts of similar size could be expected next year, the report said.

Merrill Lynch also expects the Chinese government to trim the bank reserve requirement by a total 150 basis points for all-year 2008. Chinese investors reacted to the cuts with a slight retreat after the Shanghai exchange opened Thursday morning. At the opening bell, the market index rose 33 points from Wednesday’s close to 2125 points, but slipped 0.55 percent to 2104 by mid-morning.

The Shanghai Composite Index, the A-share benchmark, closed down 3 percent Wednesday at 2092. Financial and real estate stocks declined while gold stocks soared. Shares in two gold companies climbed 10 percent, the upper trading limit, as investors sought safety in precious metals.