A teller counts Chinese yuan notes Economists had been expecting a cut in reserve requirements earlier in the year
China's central bank has cut the amount of money banks must keep in reserve, in an effort to boost lending and sustain economic growth.
The reserve requirements will fall half a percentage point from 24 February, the People's Bank of China said.
Analysts said this could add as much as 400 billion yuan ($63.5bn; £40bn) to the financial system.
The Chinese economy is showing signs of slowing as Europe's debt crisis hurts Chinese exports.