HONG KONG — China's central bank cut its benchmark interest rate Tuesday and freed banks to lend more, the latest signs of the government's growing distress over slumping stocks and slowing economic growth.
The central bank's action followed a global stock market rout in which China led the declines.
The main Shanghai share index plunged another 7.6 percent Tuesday, to its lowest level this year.
In early trading Wednesday, the index swung between gains and losses, perhaps signaling that two months' worth of attempts by the government to prop up stock prices had limited effect.
On Tuesday, China's prime minister, Li Keqiang, acknowledged that the country is feeling the effects of market turbulence, but maintained that the economy remains sound.
"Global economic trends are opaque and confusing, and market volatility is quite large, and this has had some impact on the Chinese economy," Li said. "Fundamentally the overall stability of the Chinese economy has not changed, and positive factors sustaining a turn for the better in the real economy are accumulating."
China, he added, could fulfill its economic goals for the year. Li also said there will be no continued depreciation of the renminbi currency after a sharp devaluation this month.
Even so, the tumult has prompted further action.
In an aggressive two-part move Tuesday, the central bank lowered the lending and deposit rates by 0.25 of a percentage point and cut the so-called reserve requirement ratio for the amount of cash that banks are required to hold in reserve by 0.5 of a percentage point.
Cutting interest rates may help lift the economy, as signs have proliferated in recent weeks that growth is slowing faster than some official data suggest.
The central bank also made a step toward interest rate liberalization by removing the upper limit on interest rates for fixed-term deposits of more than one year.
Like many emerging economies across the world, China in recent months has been fighting capital outflows, which rose to a record $70 billion in July. And they probably increased this month. Investors are worried that the currency could fall further, and are seeking better returns elsewhere.
At the same time, China has been struggling with deflation, or falling prices, in its industrial sector for more than three years.
Injecting more funds by freeing banks to lend more should help soften the blow of deflation and stem capital outflows.