China's central bank cut interest rates on Monday as new data showed the economy losing steam last month because of renewed Covid lockdowns and a deepening property downturn.

The People's Bank of China reduced the main rate at which it provides short-term liquidity to banks, from 2.1% to 2%. The central bank also cut the rate of its one-year lending facility from 2.85% to 2.75% in order to "maintain reasonable and sufficient liquidity in the banking system," it said in a statement.

It was the first time since January that those rates had been cut.

The move took investors by surprise. The central bank had previously appeared reluctant to lower rates further given concerns about the risk of rising debt, consumer inflation and pressure on the yuan, despite the economy stalling in the April-June quarter.

"The PBOC seems to have decided it now has a more pressing problem: the latest data show lacklustre economic momentum in July and a slowdown in credit growth, which has been less responsive to policy easing than during previous economic downturns," said Julian Evans-Pritchard, senior China economist at Capital Economics, in a research note on Monday.