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* China feeling effect of credit crunch

* Britain's Brown asks Gulf states to cough up

* Russia makes more funds available

By Angus MacSwan

LONDON, Nov 1 (Reuters) - Two powerhouse emerging market countries in Asia felt the sting of the global financial crisis on Saturday as India cut its main short-term lending rate and China said it was bracing for a slowdown.

In Europe, Britain's Prime Minister Gordon Brown, who has played a big role in combating the crisis, appealed to oil-rich Gulf states to pour money into stabilising the world financial system and helping afflicted countries.

Other countries took steps to shore up their own economies. Russia moved 170 billion roubles ($6.41 billion) from a national fund to a state bank on Saturday as part of Moscow's $200 billion markets and economy rescue plan.

And German Chancellor Angela Merkel urged German banks to tap a 500 billion euro ($638.9 billion) government rescue package. She and Brown will meet in London on Thursday.

The developments in the worst financial crisis in eight decades followed signs in the past week that world markets were stabilising, with interbank rates falling and U.S. stocks posting their best week in 34 years.

But in Shanghai, a senior Bank of China (BOC) executive told a financial conference the impact of the crisis on China has started to appear.

China has seen a sharp slowdown in industrial profit growth and fiscal income, Executive Vice President Zhu Min told a financial conference. The global economy will likely enter recession next year with the United States, Europe and Japan posting negative growth, he said.

"That will have a huge impact on China," he said.

Zhu also said currency volatility was expected to add further pressure on China's banks, which have enjoyed robust profits for years as the country boomed. Earnings growth is now slowing as the economy cools from the impact of the crisis.

"The uncertainties in the world's currency markets have exposed the Chinese banking sector to higher foreign asset risk," Zhu said.

ACTION ON LIQUIDITY FRONT

In India -- like China, a magnet for foreign investment investment in recent years as their economies roared -- the central bank cut its main lending rate for the second time in as many weeks to ease a cash squeeze and spur economic growth.

Analysts said the surprise move showed Indian concern that strains on its economy were quickly becoming more severe.

"These actions were necessary (and had) to be taken on the liquidity front...the situation was getting worse," said Vikas Agarwal, strategist at JP Morgan.

The central bank cut the repo rate or its main short-term lending rate by 50 basis points to 7.5 percent and banks' cash reserve requirements by 100 basis points to 5.5 percent.

"The global financial turmoil has had knock-on effects on our financial markets; this has reinforced the importance of focusing on preserving financial stability," the bank said.

Policymakers around the world have slashed interest rates in recent weeks and injected huge amounts into their banking systems to try to combat the spillover effects of the global crisis, which is causing credit markets to freeze up and threatens to plunge the world economy into recession.

Britain's Brown, speaking as he set out to visit the Gulf, said Saudi Arabia and other oil-producing Gulf states, could contribute funds to the International Monetary Fund or other entities to ease the crisis.

"Their interest is in a stable energy price, not in the massive volatility we have seen where oil prices have shot up and then come down again. Their interest too is in a well-functioning global economy," Brown told Sky News.

His tour precedes a global summit in Washington on Nov. 15 which will seek to reform the international financial system.

Russia meanwhile placed 170 billion roubles ($6.41 billion) from its National Wealth Fund with state bank VEB as part of a plan which will allow for state purchases of shares and corporate bonds.

The state share purchases have already had a positive impact on Moscow's bourses, helping to put them on track for the best week on record with gains of nearly 50 percent.

SWISS CONCERNS

The Swiss National Bank said it was growing more concerned over the state of the Swiss economy.

"The situation has noticeably worsened because the financial crisis is clearly affecting the real economy." SNB Chairman Jean-Pierre Roth said in a newspaper interview.

"We have two elements which are not pointing in the right direction -- the nominal development in the franc and the three-month LIBOR rate, which is above our target," Roth told the Neue Zuercher Zeitung. "This is a big challenge for us."

The business outlook weakened in the United States, where the question of whether Republican candidate John McCain or Democrat Barack Obama would handle the economic crisis best has dominated debate before next Tuesday's presidential election.

A U.S. Commerce Department report on Friday showed consumers cut monthly spending for the first time in two years in September, evidently bracing for hard times as jobs continue to disappear and credit conditions tighten.

As another week ended in the crisis, the Bank of Japan slashed interest rates and British banking giant Barclays (nyse: BCS - news - people ) said it was raising $12 billion in capital.

But there were signs that the moves taken by central banks and others to remove blockages in the credit system were working to some extent.

U.S. stocks closed higher on Friday as investors picked up bargains following recent heavy losses. European shares reversed losses and followed Wall Street higher.

The Bank of Japan rate slash followed a cut by the U.S. Federal Reserve on Wednesday. The European Central Bank and the Bank of England are expected to do the same next week.