CHINA’S central bank is kicking into gear, launching new stimulus designed to counter the country’s slowest economic growth in six years.

    The People’s Bank of China (PBOC) announced Sunday that it will lower the amount of cash that large banks must keep on reserve by 1 percent to 18.5 percent, a move that should boost the economy by freeing up money for banks to lend.

    Economists have expected the central bank to act, especially after a slew of disappointing economic data last week. First quarter GDP growth came in at 7 percent, the worst since 2009, and a host of other figures were weaker than anticipated.

    But analysts said the magnitude of this move shows just how worried policymakers are over economic growth. The last time the Central Government slashed the reserve requirement ratio by 1 percent in a single go was during the height of the global financial crisis.

    “While additional reserve requirement ratio cuts were expected throughout 2015, the size and timing of this cut indicates leaders are more deeply concerned about the state of the economy than official comments previously indicated,” wrote IHS economist Brian Jackson in a research note.

    Economists expect the PBOC to again lower the reserve requirement ratio and cut interest rates later this year in order to meet the government’s GDP growth target of about 7 percent. The government has cut rates twice since last November.

    The central bank’s policy shift may also be aimed at neutralizing the negative impact of new stock trading rules. China’s securities regulator issued guidelines Friday that clamped down on margin trading, while making it easier to short stocks.

    China’s stocks surrendered early gains and dived yesterday in volatile trade as fears of a regulatory crackdown offset the central bank’s boldest policy move yet to bolster the slowing economy.

    Some of the estimated 1 trillion yuan (US$161.30 billion) in funds freed up by the cut in required reserve ratio in banks are expected to find their way into stock markets.

    Chinese markets have continued to rise despite poor economic prospects, bolstered by a belief that the government will continue to act to support growth.(SD-Agencies)