The National Development and Reform Commission, however, denied that the authorities intend to introduce another "massive" stimulus.

Rather than announcing another stimulus package and depending too much on monetary loosening, China needs to speed up the implementation of its current fiscal commitments, said Yvonne Zhang, vice-president at Moody's Investors Service (Beijing) Ltd.

Qu Hongbin, HSBC's Hong Kong-based chief economist for China, said steady growth is a priority for Beijing and the authorities have sufficient policy tools to roll out a "powerful" package. "In addition to the monetary easing, we believe China will use fiscal stimulus and open up more sectors for private investment."

He expected growth in the second half to rebound to more than 8.5 percent.

Douglas Borthwick, managing director of the foreign-exchange consultants Faros Trading, said the interest rate cut is likely to be the start of a new easing cycle. If Europe continues to twist on the vine, more cuts will be delivered.

"Rate cuts in China serve to reduce China's exposure to global weakness. Rate cuts in combination with a stimulus program, still to be announced, should shelter Asia somewhat from global weakness," he said.

Duncan Freeman, senior researcher with Brussels International Contemporary Chinese Studies, said the rate cuts indicate that China is prepared to respond strongly to slowing growth in recent months.

Lower interest rates is "heartening news" to companies as it will help stimulate consumer spending and vitalize production, said Dong Yaojun, from the Shanghai Guangyu Automobile Air Conditioning Compressor Co.

Rate cuts are most likely to benefit manufacturing and trade businesses, said Tang Wenming, chief executive officer of License Software Consulting Co Ltd.