China's central bank today stepped up policy support for its embattled economy.

It cut a key rate to a record-low and reduced the amount banks must hold as reserves by around $28 billion as the coronavirus crisis slammed the brakes on growth. 

Combined the moves inject a total of $43 billion into the financial system ahead of a report on Friday that is expected to show GDP fell 6.5% in the first quarter, the first quarterly contraction in the world's second biggest economy in more than 30 years. 

The People's Bank of China (PBOC) said it was lowering the one-year medium-term lending facility (MLF) loans to financial institutions to 2.95%, the lowest since the liquidity tool was introduced in September 2014, down 20 basis points from 3.15% previously. 

The cut should pave the way for a similar reduction to the country's benchmark loan prime rate (LPR), which will be announced on the 20th, to lower financing costs for companies hit by the pandemic. 

In a statement, the central bank said that it was injecting 100 billion yuan ($14.19 billion) through the liquidity tool. 

The cut was largely in line with market expectations. 

China is due to release its first quarter GDP data and activity indicators on Friday.

Besides the first quarter contraction, analysts are forecasting 2020 growth to slow sharply to 2.5%, the weakest in nearly half a century, from 6.1% last year. 

"Unlike previous easing cycles, when most of the new credit went to finance spending on infrastructure, property and consumer durable goods, this time we expect most of the new credit to be used on financial relief to help enterprises, banks and households survive the COVID-19 crisis," Nomura analysts said in a note. 

China's central bank said earlier in the month it was cutting the amount of cash that small banks must hold as reserves to shore up the economy, which has been badly jolted by the coronavirus crisis. 

The first phase of the cut came into effect today, freeing up around 200 billion yuan ($28.37 billion) of long-term funds, the PBOC said in its statement, although it did not comment on the MLF rate cut. 

"With external headwinds mounting and domestic demand struggling to fully recover from the COVID-19 outbreak even as most firms have resumed operations, the PBOC appears to be ramping up the pace of monetary easing," Julian Evans-Pritchard, senior China economist at Capital Economics said in a note.

"But more will be needed to ensure the economy gets back on track," he said, and forecast another 100 basis points of additional rate reductions this year. 

Global central banks have rolled out unprecedented stimulus measures in the past few weeks, cutting rates sharply and injecting trillions of dollars to backstop their economies as many countries have been put under tight lockdowns to contain the pandemic. 

However some analysts questioned whether monetary easing may be reaching its limits and doubt if it could provide a sufficient boost to demand needed to lift the economy.

"The problem is not the level of rates at the current juncture," said Alicia Garcia Herrero, Chief Economist Asia Pacific at Natixis in Hong Kong.

"They need to prod (people) to consume," she said, advocating the expansion of a consumption voucher programme already begun at the local level in the city of Hangzhou.

"They are really under pressure not to cut any further, because insurance companies and banks are really worried about their margins," she said.