China cut interest rates unexpectedly on Friday, stepping up efforts to support the world's second-biggest economy

China cut interest rates unexpectedly on Friday, stepping up efforts to support the world's second-biggest economy as it heads towards its slowest expansion in nearly a quarter of a century.

The cut, the first in over two years, came as factory growth has stalled and the property market, long a pillar of growth, has remained weak, dragging on broader activity and curbing demand for everything from furniture to cement and steel.

"It's comes right after China's disappointing PMI figures showing that manufacturing activity is getting dangerously close to contraction," said Alexandre Baradez, chief market analyst at IG in Paris, referring to a private factory survey this week which added to worries about slowing global growth.

"China's central bank is now following the path of the Fed, the ECB and the BoJ. Central banks are really driving markets," he said.

Just a few weeks ago, Chinese President Xi Jinping had assured global business leaders that the risks faced by China's economy were "not so scary" and the government was confident it could head off the dangers.

© REUTERS/Jason Lee The headquarters of China's central bank, the People's Bank of China, is pictured behind an iron chain in Beijing, June 21, 2013. In a speech to chief executives at the Asia Pacific Economic Cooperation (APEC) CEO Summit, Xi said even if China's economy were to grow 7 percent, that would still rank it at the forefront of the world's economies.

The People's Bank of China said it was cutting one-year benchmark lending rates by 40 basis points to 5.6 percent. It lowered one-year benchmark deposit rates by less - just 25 basis points. The changes take effect from Saturday.

"The problem of difficult financing, costly financing remains glaring in the real economy," the PBOC said.

LIMITING THE IMPACT

The central bank also took a step to free up deposit rates, allowing banks to pay depositors 1.2 times the benchmark level, up from 1.1 times previously.

"They are cutting rates and liberalising rates at the same time so that the stimulus won't be so damaging," said Li Huiyong, an economist at Shenyin and Wanguo Securities.

Recent data showed bank lending tumbled in October and money supply growth cooled, raising fears of a sharper economic slowdown and prompting calls for more stimulus measures, including cutting interest rates.

But many analysts had expected the central bank to hold off on cutting interest rates for now, as authorities have opted instead for measures like more fiscal spending, as they also try to balance the need to reform the economy.

Chinese leaders have also repeatedly stressed they would tolerate somewhat slower growth as long as the jobs market remained resilient.

More recently, the central bank injected cash into the system in the form of short-term loans to banks in an attempt to keep down borrowing costs and encourage more lending even as bad loans increase.

But a growing number of economists said those moves were not translating into either lower financing costs or more credit for cash-starved Chinese companies.

Analysts expressed doubts over whether the impact of the rate cut would find its way into the real economy, either, as the cooling economy makes lenders more risk-averse. Some predicted multiple cuts would be needed well into next year.

Hurt by the cooling property sector, erratic export demand and slackening domestic investment growth, China's economy is seen posting its weakest annual growth in 24 years this year at 7.4 percent.

China's rate move comes after the Bank of Japan sprang a surprise on Oct. 31 by dramatically increasing the pace of its money creation, while European Central Bank President Mario Draghi shifted gear on Friday and threw the door wide open to quantitative easing in the euro zone.

"There is definitely more concern around about the state of the global economy than there was a few months ago, you see that not just when you talk about Europe," British finance minister George Osborne told an audience of business leaders in London on Friday

The unemployment rate has dropped to 7.7% and the U.S. economy added 236,000 jobs in Februarynew unemployment benefits fell to the lowest level in a month and a half and hovered just above a five-year low

The number of Americans who applied last week for new unemployment benefits fell to the lowest level in a month and a half and hovered just above a five-year low, offering another sign that the outlook for hiring is on the upswing BREAKING: The unemployment rate has dropped to 7.7% and the U.S. economy added 236,000 jobs in February. Service industries led the gains with 73,000 new jobs, while construction added 48,000 and health care provided 32,000. Economists expected the economy created 160,000 jobs in February and the unemployment rate held steady at 7.9 percent.The Commerce Department reported that the trade deficit widened to $44.45 billion in January from $38.14 billion in December. Exports fell, giving back the bulk of December’s gains, while imports rebounded after being depressed by disruptions to port activity in the previous months. The inflation-adjusted trade deficit widened to $48 billion from $44.2 billion in December. Economists said this suggested that trade would be a small drag on first-quarter growth However, there was anticipation that the number could come in a bit better than expected after ADP reported earlier this week that the private sector created 198,000 for the month. Investors watch the nonfarm payrolls number closely both to gauge general economic health and to discern future Federal Reserve policy moves.Worker productivity fell at a 1.9 percent annual rate, the weakest pace since the fourth quarter of 2008, the Labor Department reported. A month ago it estimated that productivity, hourly output per worker, fell at a 2 percent pace. The central bank has kept interest rates near zero for the past four years and is buying $85 billion in Treasurys and mortgage-backed securities each month in an effort to stimulate growth. Fed officials have said the rate policy will continue at least until unemployment drops to 6.5 percent and inflation rises to 2.5 percent. However, the bond buying, known as quantitative easing, likely will stop well ahead of that if the Fed sees sustained growth signals Job Creation Surges as Rate Falls to 7.7% www.cnbc.com Job creation broke out in February, with the economy creating a net 236,000 new jobs as the unemployment rate fell to 7.7 percent.