Joining a unison of action by central banks elsewhere, China has announced interest rate and reserve ratio cuts on Wednesday evening to reduce strains in the financial market as credit crunch sweeping the globe.

The People's Bank of China, the country's central bank, cut the deposit and lending rates by 0.27 percentage point from Oct 9 and lowered the reserve-requirement ratio by hald a percentage point from Oct 15.

In a notice announcing the move, the central bank said the rate cuts were aimed at stimulating domestic economy.

It was the second time in one month that the rates were lowered. On September 16, the lending rate was also cut by 0.27 percentage point and that was the first drop in six years.

China's latest move was coordinated with measures taken by central banks worldwide in coping with the current financial crisis. Rate cuts had been announced this week by the US Federal Reserve, European Central Bank, Bank of Japan, Bank of England, Hongkong and the central banks of Australia, Canada, Sweden and Switzerland.

Meanwhile, the State Council of China also announced on the same day that it would exempt interest earned from savings for individual income tax, effective from Oct 9.

The latest moves all indicated that China had reversed its tight monetary control measures imposed since last year to curb inflation and prevent its economy from overheating.

The policy U-turn came after China's consumer price index (CPI) dropped to 4.9% in August from a 12-year high of 8.7% in February. Moreover, the GDP growth rate for the first half of this year had slowed compared to last year while exports volume decreased and its stock market dive.

The financial crisis inflicting the Wall Street and rippling through the Europe and other parts of the world had also added pressure for China to loosening its macro controls to get the credit moving again.