China's central bank said Wednesday it will cut the reserve requirement ratio for the country's lenders by 0.5 percent, in the strongest move yet to ease restrictions on lending.
The move, which takes effect on December 5, is a sign that the government is easing tight credit restrictions put in place to curb surging inflation and property prices.
The People's Bank of China said in the brief statement that it will reduce the ratio by 0.5 of a percentage point, effectively increasing the amount of money banks can lend.
Credit restrictions have fuelled an explosion in underground lending as private bosses borrow money at high interest rates from informal lenders after being rejected by major banks who favour other state-controlled enterprises.
But the recent disappearance of more than 90 entrepreneurs in Wenzhou city in Zhejiang, who are thought to have run away over high debts, has fuelled concerns that even the informal lending market could collapse.
China, anxious about rising living costs, has pulled on a variety of levers to curb price rises in the past 18 months, including restricting the amount of money banks can lend and hiking interest rates.