China’s central bank on Sunday said it was cutting the reserve requirement ratios (RRRs) by one per cent from October 15 which will inject a net $109.2 billion in cash into the banking system, amid a deepening trade war with the US that has increased pressure on growth in the world’s second-largest economy.

The reserve cut, the fourth by the People’s Bank of China (PBOC) this year, came after Beijing pledged to speed up plans to invest billions of dollars in infrastructure projects as the economy shows signs of cooling further.

The PBOC said it will cut the RRR for RMB deposits by one percentage point starting from October 15. The cut will enable banks in China to release 1.2 trillion-yuan cash for additional lending.  

Some of the liquidity unleashed will be used to pay back the 450 billion yuan ($65 billion) of the medium-term lending facility that will mature on October 15, state-run Xinhua news agency reported.

In addition, the liquidity of another 750 billion yuan ($110 billion) will be injected into the market for lending, according to the PBOC statement.

The announcement of the relaxing the RRR requirement for the banks, which are also saddled with the huge local government debt of $2.58 trillion comes amid deepening trade war with US and raising of the interest rates by US Federal Reserve, intensifying the pressure on capital outflows.

The huge cash outflow from the banks was expected to help the private businesses to access more credit as their products faced an uncertain prospect in the US, which is China’s second largest market after the European Union.