The central government on Friday cut the amount banks must hold in reserve, a bid to boost its economy by releasing an estimated US$142.6 billion in liquidity into the financial market.

Beijing has this week unveiled a raft of measures to boost its economy, which it has targeted to grow five percent this year.

On Thursday, the Chinese Communist Party convened a meeting of its top body, the Politburo, to "analyse and study the current economic situation".

Beijing on Friday also cut the seven-day reverse repo rate, the short-term interest paid by the central bank on loans from commercial lenders.

The central bank announced it cut the key rate from 1.7 percent to 1.5 percent.

Growth in China is being dragged down by a prolonged debt crisis in the property sector, sluggish domestic consumption and high youth unemployment.

"Some new situations and problems have emerged in the current running of the economy," the Xinhua news agency reported after Thursday's Politburo meeting.

"We must view the current economic situation comprehensively, objectively and calmly, face difficulties squarely, (and) strengthen confidence," it added.

Politburo members also agreed on the need to "further improve the focus and effectiveness of policy measures" aimed at lifting the economy.

The raft of measures unveiled by Beijing, including key rate cuts and policies intended to encourage home purchases, have been welcomed by investors, with stocks in Shanghai and Hong Kong up more than nine percent so far this week. (AFP)