After five years of double-digit expansion, figures for the third quarter showed the annual growth rate falling to 9%, well below even the most pessimistic forecasts.
The Chinese State Council, the country's cabinet, also said it was planning increases in infrastructure spending on roads, airports, nuclear power plants and hydro power stations.
'The global financial crisis and subsequent slowdown has started and will continue to have a negative impact,' said Li Xiaochao, spokesman at the National Bureau of Statistics. 'The subprime crisis that broke out last year in the US is still spreading and deepening,' he added.
Economists believe the Chinese economy will continue to decelerate further, especially if the global financial crisis starts to hurt exports from China, one of the main drivers of economic growth.
The government said that taxes on residential property purchases would be reduced and value added tax rebates would be increased for exporters of textiles and machinery.
However, there is a debate in official circles about just how big a fiscal stimulus is needed to prevent a sharper slowdown.
'This is very quick response. I think the authorities have realised it is urgent to take measures to stabilise domestic economic growth at a time of global turbulence,' said Zhu Jianfang, chief economist at CITIC Securities in Beijing.
The latest government figures show that property prices are still increasing but at a slower rate. In 70 major Chinese cities prices rose 3.5% year-on-year in September, compared with 5.3% in August. Prices for new residential property rose 3.9% year-on-year in September, down 2.3% compared with August.
Some cities experienced showed high growth. Haikou, Yinchuan and Yichang saw growth rates of 15%, 12.7% and 10.3%, respectively. Non-residential property prices grew 3.0% last month, down 1% from August.
