Chinese shares edged higher Friday after the People's Bank of China lowered benchmark interest rates for the first time in three years to boost economic growth.

Chinese Shanghai Composite advanced 0.03 percent or 0.79 points to 2,293.92 and Hong Kong's Hang Seng fell 0.76 percent, or 141.68 points, to 18,536.61.

The People's Bank of China Thursday lowered the one-year lending rate by 0.25 percentage points to 6.31 percent from 6.66 percent and the one-year deposit rate by the same amount to 3.25 percent to shore up slackening economic growth. The cut is the first one since December 2008 and also raised concerns that the latest economic data for May would show further deterioration in Chinese growth.

The policy action reflects mounting concern in Beijing over the slowdown of growth, and at the same time its determination to kick-start its interest rate liberalization campaign. Thursday's move point to an official start of a rate cutting cycle that we believe would be short and modest. We expect only one more 25bp cut in benchmark rates this year, in Q3, said a note from Credit Agricole.

Chinese property companies' shares gained in China and Hong Kong after the rate cut. China Resources Land surged 3.70 percent and China Overseas Land & Investment gained 2.99 percent in Hong Kong while Gemdale Corp advanced 1.30 percent and Poly Real Estate Group rose 0.59 percent in Shanghai.

However, the gains in Chinese shares were limited as the lack of explicit hints about further quantitative easing from Fed Chairman Ben Bernanke during his congressional testimony Thursday disappointed investors and sent the other Asian peers lower. 

Among the banking shares, Industrial & Commercial Bank of China plunged 4.69 percent and Bank of Communications declined 3.71 percent while Bank of China fell 2.11 percent.