China's central bank announced broad monetary stimulus and property market support measures to revive an economy grappling with strong deflationary pressures and in danger of missing this year's growth target.
Governor Pan Gongsheng, speaking at a news conference alongside officials from two other financial regulatory agencies, said the central bank will cut the amount of cash that banks must hold as reserves - known as reserve requirement ratios (RRR) - by 50 basis points.
The People's Bank of China will also cut the seven-day repo rate by 0.2 percentage point to 1.5%. Deposit and other interest rates will fall as well.
Interest rates on existing mortgages will also be reduced by 0.5 percentage point on average, Pan said, in a move that could provide some relief to households but may raise concerns about bank profitability.
Pan did not specify when the moves will come into effect.
China's economy grew much slower than expected in the second quarter, weighed down by a protracted property crisis and consumers' worries about job security. August economic data broadly missed expectations, adding urgency for policymakers to roll out more support.
"The move probably comes a bit too late, but it is better late than never," said Gary Ng, senior economist at Natixis.
"With an elevated real interest rate, poor sentiment and no rebound in the property market, China needs a lower-rate environment to boost confidence."
The government is aiming for economic growth of around 5.0% for 2024, but some investment banks including Goldman Sachs, Nomura, UBS and Bank of America have recently lowered their forecasts for China's growth rate this year.
Stocks (.CSI300), (.SSEC) rose and the onshore yuan opened at its strongest level since May 2023.
The yield on China's benchmark 10-year government bond fell 4 basis points to 2.036%, close to the record low hit last week, while 30-year treasury futures for December delivery rose to a record high.
Pan said further monetary policy easing, including another RRR cut, was on the cards later this year.
The latest Chinese policy measures come after the U.S. Federal Reserve last week delivered a hefty rate cut, which many analysts viewed as providing more head room for the PBOC to ease monetary conditions without putting too much pressure on the yuan.
