of signs of an economic downturn in various industries. Housing sales have tumbled, steel and electricity production has weakened sharply, exports have slowed down, many small and medium-sized businesses have shut down, and an increasing number of employees have lost their jobs. Some experts say China's GDP growth is likely to fall to below 10 percent this year.

"The rate cut of loans with maturities longer than five years suggests that the central bank started to ease lending toward the property sector," said Merrill Lynch & Co. in a report about the impact of the rate cuts. The U.S. financial services company predicted lighter renminbi appreciation pressure and said it expects the currency to appreciate slightly to 6.80 against the U.S. dollar by year-end.

Other major international investment banks expected more interest rate cuts in China this year. While Merrill Lynch expects two to three cuts in both lending and deposit rates at 0.27 percentage points each this year, Morgan Stanley & Co. forecasts five rate cuts by the end of next year.

Ping An Pulls Back

China's financial institutions and insurers are suffering daunting setbacks from the sweeping global financial crisis. Ping An Insurance (Group) Co. of China Ltd., the country's second largest insurer, is the latest one to feel the pinch.

Ping An's investment in the sinking Belgian financial services company Fortis Group might result in a 15.7-billion-yuan ($2.3 billion) loss in the company's third quarter report and could devour its first-half profit of 7.1 billion yuan ($1.04 billion). This could cause a net loss for Ping An in 2008, analysts said.

In the wake of a Fortis bailout plan by three European governments, Ping An said it had terminated an agreement it signed in April to purchase 50 percent of the shares (worth 2.15 euros each) of Fortis' asset management company.

From last November until the outburst of Fortis' predicament in late September, Ping An made three purchases of Fortis shares, which it initially bought for 19 euros each, but later fell to 5.5 euros each in early October. Ping An currently holds a 4.99-percent stake of Fortis.

Although the falling price of Fortis shares has taken its toll on Ping An, the insurer said its core businesses are doing well, it is maintaining adequate capital, and it is highly solvent. The company also said the impairment on the Fortis-related loss could only diminish its 2008 profit, and that it would resume regular profitability next year.

Blackstone's Deal in China

U.S. private equity firm the Blackstone Group LP has bought a 20-percent stake in a mainland new material and specialty chemical products company.

On October 7, China National Bluestar Group Corp. (Bluestar), a large state-owned new material manufacturer founded 24 years ago, announced that Blackstone had purchased a 20-percent stake in it, worth $600 million. Bluestar's parent company, China National Chemical Corp. (ChemChina), owns the remainder.

It was the first deal inked by Blackstone in China, and was agreed on in September 2007. Ren Jianxin, General Manager of ChemChina, said in a statement that Blackstone's purchase of the stake proved Bluestar's value and development potential.

The deal came at a time when major U.S. financial institutions are cutting back on their overseas investments because of the Wall Street-led credit crunch. But some analysts believe Blackstone's investment shows that international financial institutions have a positive outlook on China's economy, which has experienced double-digit growth in the past few years.

Beijing Hikes Gas Prices

Despite falling crude oil prices, Beijing unexpectedly raised the price of fuel by 8 percent to discourage the use of cars and reduce greenhouse gas emissions. It was the second time that authorities in the capital have raised fuel prices this year.