China will cut banks' reserve requirement ratios (RRRs), taxes and fees, Premier Li Keqiang said on Friday, as the world's second-largest economy slows.
The policy move was announced hours after Chinese Premier Li Keqiang told the central bank to make universal cuts of the ratio as part of Beijing's efforts to bolster economic growth having cut the RRR four times past year.
"The move will offset liquidity fluctuations caused by cash injections before the Spring Festival this year, and will help financial institutions continue to strengthen support for small and micro businesses as well as private businesses", the central bank said.
China's central bank acted to release cash into the economy to support growth, cutting the amount of cash lenders must hold as reserves by 1 percentage point.
Tax cuts could be a better way to improve corporations' profitability and boost investments at this time, which is "key to avoiding irrational credit expansion and reducing the risk of further credit tightening in the future", said Mr Xu.
"This speedy RRR cut with great intensity fully demonstrates the determination of policymakers to stabilise growth", said Yang Hao, an analyst at Nanjing Securities.
RRRs - now 14.5 percent for large institutions and 12.5 percent for smaller banks - will be lowered by a total of 100 basis points in two stages, the PBOC said.
Local governments are encouraged to set up financing funds for private enterprises, and supportive tools for equity and bond financing for private firms will also be promoted, according to a statement released Friday after a work conference of the People's Bank of China (PBOC).
"The economy is weak and stimulus needs to arrive quickly", economists at ING said in a note earlier this week.
The latest reduction announced is the first all-inclusive RRR cut since March 2016.
The announcement comes as concerns are growing over the effects of the trade conflict with the United States on the country's economy. It also highlighted maintaining market liquidity at a reasonably ample level.
The effectiveness of a move by China's central bank to inject up to an expected 700 billion yuan into the world's second largest but worryingly slowing economy is hard to calculate given the lack of transparency in the monetary policy, warned a chief economist.