Beijing has intensified cash flow across the financial system this year since policymakers are concerned on soothing capital outflow fears and strive for soothing pommeled markets amid the growing anxieties regarding frenzied trade war with the USA could have a damaging effect on the broader economy.
Spot yuan was on track for its lowest close in seven weeks against the USA dollar, as expectations of more easing measures by China, plus surging United States bond yields, put pressure on the Chinese currency.
Asian markets fell on Monday, extending last week's sell-off as another strong USA jobs reading further fanned expectations the Federal Reserve will hike interest rates at a quicker pace.
The three core stock indexes on the mainland, the Shanghai Composite, Shenzhen Component and Growth Enterprise Market benchmarks declined 3.72 percent, 4.05 percent and 4.09 percent.
Xu further added, "The trade war's impact on the economy is showing".
The People's Bank of China (PBOC) decided on Sunday to cut the reserve requirement ratio (RRR) for RMB deposits by one percentage point starting from October 15, but the stance of China's monetary policy remains unchanged.
The easing, announced on the last day of China's week-long National Day holidays, came at a time when the world's second biggest economy is losing momentum amid an intensifying trade war with the US.
U.S. Vice President, Mike Pence in his speech last week increased Washington's pressure crusade against Beijing on Thursday by hinting malign Chinese efforts to emasculate Donald Trump before congressional elections that are about to take place next month. "China trade tension further escalate".
The move will be used to pay down 450 billion yuan ($65.6 billion) of medium-term lending facilities, it said, adding that it could also free up another 750 billion yuan in funds. Yields of China's 10-year central government bonds have been trending lower this year, standing at 3.633 per cent on Monday. Sydney retreated 1.4 percent, Singapore eased 0.5 percent, and Taipei and Seoul were each 0.6 percent lower. At present, the interest rate on China's benchmark bond is about 60 basis points higher than on the US one. The spot market opened at 6.9000 per dollar and was changing hands around 6.9030 in late afternoon trading, the lowest level since mid-August. The onshore yuan has weakened about 5.5 per cent against the dollar this year.
The move has resulted in an increased weakening of China's currency, which has been down nearly 6% against the dollar this year and, following the news, on Monday the Chinese currency slipped to 0.4% versus the dollar.
Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said that the worst that could happen is the US imposing levies on all Chinese imports, but that would only hit 0.7 percentage points of China's growth. The last close before the long holiday was 6.8725 to the dollar.