China has cut its one-year benchmark interest rate by 0.25 percentage points to 4.35%.
European shares gained ground following the decision, particularly in the mining sector, and commodities rose.
The Chinese central bank also cut the ratio of Chinese currency that it expects its banks to hold.
China hopes that looser monetary policy, in the shape of cheaper money, will help it hit its growth target of 7% for 2015.
The rate changes will come into effect on Saturday.
In London, shares in the benchmark FTSE 100 index rose 1.74%, led by miners Glencore and Fresnillo, which added 9% and 5% respectively.
Brent crude was up 0.8% to $48.46 per barrel.
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