Chinese shares opened sharply higher on Thursday following an unusually big interest rate cut of 1.08 percentage points, which was announced by the central bank after Wednesday's closing.

The benchmark Shanghai Composite Index, which covers both A and B shares, jumped 114.80 points, or 6.05 percent, to 2012.69 at the opening. The smaller Shenzhen index rose 389.51 points, or 5.96 percent, to open at 6923.37 points.

The People's Bank of China (PBOC, central bank) said on Wednesday afternoon that it would cut the benchmark one-year yuan lending rate to 5.58 percent from 6.66 percent and the one-year yuan deposit rate to 2.52 percent from 3.60 percent.

The monetary easing is aimed at "ensuring ample liquidity in the banking system and promoting stable credit growth to make the monetary policy play an active role in supporting economic growth," the PBOC said in a statement.

It was the fourth interest rate cut since mid-September. It also was the largest cut since October 1997 when the central bank slashed the one-year borrowing cost by 1.44 percentage points to support growth to withstand the Asian financial crisis.

The PBOC also said as of Dec. 5, it would lower the reserve requirement ratio by 1 percentage point at the large banks and by 2 percentage points at the smaller and medium-sized banks.

The large lenders include Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications and Postal Savings Bank of China.

(Xinhua News Agency November 27, 2008)