Beijing • China cut state-set gasoline and diesel prices for the second time in a month on Friday amid mounting government efforts to reverse a sharp slowdown in the world's second-largest economy.

The reduction in fuel prices followed an interest rate cut on Thursday, which was the first in almost four years, and a small but significant step toward letting the market set rates paid on bank deposits.

The fuel price cut will reduce retail costs of the mostly commonly used grade of gasoline by over 5 percent. Diesel prices will be cut by a similar amount, effective Saturday.

The central bank's rate cut was the first since 2008 and came as Chinese leaders are reversing course after tightening controls for two years to cool an overheated economy. Beijing also announced that it will for the first time allow banks to pay deposit rates higher than the state-mandated level. That might help to shift money to households and boost consumer spending.