China cuts bank reserve ratio by 50 bps

China's central bank cut the reserve requirement ratio for its banks on Wednesday for the first time in nearly three years to ease credit strains and shore up activity in the world's second-largest economy.

The 50-basis-point cut in the reserve ratio showed China's monetary policy has swung into easing mode as economic growth slows while inflation eases.

The cut lowers the reserve ratio for China's biggest banks to 20% from record highs, and frees up funds that could lubricate lending to cash-deprived small firms.

The new ratio is effective December 5, the central bank said in a short statement on its website.

The central bank last cut the reserve ratio in December 2008, when China's economic growth floundered on the global financial crisis.