China's central bank has announced a steep cut in the level of cash that banks must hold as reserves.

The move comes as the central bank steps up moves to lower financing costs and spur growth amid concerns over the economic drag from an escalating trade dispute with the US. 

The reserve requirement cut is the fourth by the People's Bank of China (PBOC) this year.

It comes as Beijing has pledged to expedite plans to invest billions of dollars in infrastructure projects as the economy shows signs of cooling further, with investment growth slowing to a record low. 

Reserve requirement ratios (RRRs) - currently 15.5% for large commercial lenders and 13.5% for smaller banks - would be cut by 100 basis points effective October 15, the PBOC said, matching a similar-sized move in April. 

Economists predicted further cuts ahead. 

Beijing has stepped up liquidity support across the financial system this year as policymakers have focused on calming fears of capital outflows and sought to soothe battered markets even as anxiety grows that a heated trade war with the US could deal a damaging blow to the broader economy. 

China's yuan currency has faced strong selling pressure this year, losing over 8% between March and August at the height of market worries, though it has since cut losses as authorities stepped up support. 

This latest move will inject a net 750 billion yuan ($109.2 billion) in cash into the banking system by releasing a total of 1.2 trillion yuan in liquidity, with 450 billion yuan of that to offset maturing medium-term lending facility (MLF) loans. 

The RRR cut, announced on the last day of China's week-long National Day holiday, indicates that the central bank is worried about the impact of "external shocks" to markets.

The central bank said on Sunday it would continue to take necessary measures to stabilise market expectations, while maintaining a prudent and neutral monetary policy. 

The PBOC would "maintain reasonably ample liquidity to drive the reasonable growth of monetary credit and social financing scale", it said. 

The RRR cut would not create depreciation pressure on the yuan, the PBOC said, adding it would keep the foreign exchange markets stable. 

With China's economy cooling and the full impact of US trade tariffs still to be felt, policymakers are shifting their priorities to reducing risks to growth, with the yuan and stock markets under pressure. 

China's economic growth rate slowed slightly to 6.7% in the second quarter year-on-year, still well above the government's full-year target of around 6.5%. But some key activity indicators have weakened more sharply.

Fixed-asset investment is growing at the slowest pace on record, while non-performing loans surged in the second quarter and defaults climbed. The July nationwide jobless rate rose to 5.1%. 

Smaller companies, in particular, are having a tough time securing loans and are grappling with rising borrowing and operating costs, fueled in part by a lengthy official clampdown on riskier lending like shadow banking. 

China's banking regulator has asked banks to significantly lower funding costs for smaller firms and raise their tolerance for non-performaning ratios for loans to small and micro firms.