Two powerhouse emerging market countries in Asia felt the sting of the global financial crisis yesterday as India cut its main short-term lending rate and China said it was bracing for a slowdown.
In Europe, Britain's Prime Minister Gordon Brown, who has played a big role in combating the crisis, appealed to oil-rich Gulf states to pour money into stabilising the world financial system and helping afflicted countries.
Other countries took steps to shore up their own economies. Russia moved 170 billion roubles ($6.41 billion) from a national fund to a state bank yesterday as part of Moscow's $200 billion markets and economy rescue plan.
And German Chancellor Angela Merkel urged German banks to use the €500 billion ($638.9 billion) government rescue package.
She and Brown will meet in London on Thursday.
The developments in the worst financial crisis in eight decades followed signs in the past week that world markets were stabilising, with interbank rates falling and US stocks posting their best week in 34 years.
But in Shanghai, a senior Bank of China (BOC) executive told a financial conference the impact of the crisis on China has started to appear.
China has seen a sharp slowdown in industrial profit growth and fiscal income, Executive Vice President Zhu Min told a financial conference. The global economy will likely enter recession next year with the United States, Europe and Japan posting negative growth, he said.
"That will have a huge impact on China," he said.
Zhu also said currency volatility was expected to add further pressure on China's banks, which have enjoyed robust profits for years as the country boomed. Earnings growth is now slowing as the economy cools from the impact of the crisis.
"The uncertainties in the world's currency markets have exposed the Chinese banking sector to higher foreign asset risk," Zhu said.
In India - like China, a magnet for foreign investment in recent years as their economies roared - the central bank cut its main lending rate for the second time in as many weeks to ease a cash squeeze and spur economic growth.
Analysts said the surprise move showed Indian concern that strains on its economy were quickly becoming more severe.
"These actions were necessary (and had) to be taken on the liquidity front... the situation was getting worse," said Vikas Agarwal, strategist at JP Morgan.
The central bank cut the repo rate or its main short-term lending rate by 50 basis points to 7.5 per cent and banks' cash reserve requirements by 100 basis points to 5.5 per cent.