BEIJING -On Friday, China escalated efforts to revive its struggling economy by implementing several key measures.

Leading banks have initiated steps to potentially lower lending rates, and there are reports suggesting that Beijing intends to take additional actions, such as easing restrictions on home purchases.

Additionally, Chinese authorities have reduced the mandatory foreign exchange reserve requirements for financial institutions. These measures have been well-received by investors, with analysts believing they will help stabilize the ailing real estate sector and prevent further economic decline.

China is currently facing a significant economic slowdown, causing concern in global markets. The attention is currently on the financial troubles of the troubled developer Country Garden, whose escalating debt crisis is affecting a sector that contributes approximately 25% to the country's economy.

In response to this mounting pressure, Chinese authorities have introduced a series of initiatives aimed at stimulating economic growth and revitalizing the property market. These measures encompass actions like relaxing certain borrowing regulations and reducing the foreign exchange reserve requirements for banks.

According to four sources familiar with the matter, China is planning to take additional steps, which include relaxing restrictions on home purchases. Regulators, including the housing ministry, central bank, and financial regulator, will be implementing measures they've been developing over the past few months, guided by the State Council's directives.

Betty Wang, ANZ's senior China economist, noted that several recent nationwide measures to ease property regulations have surpassed market expectations. This marks the first time since 2021 that China has announced a series of nationwide measures to support the property market, aimed at rebuilding market confidence and preventing further decline in the sector.

In the short term, market sentiment will be influenced by the outcome of a critical test of investor confidence in Country Garden. The developer recently extended the deadline for creditors to vote on postponing payments for a 3.9 billion yuan ($537 million) private bond, giving bondholders more time to prepare for the vote, which will now take place on Friday at 1400GMT.

The upcoming vote poses a critical challenge for Country Garden as it endeavors to avert default. According to one holder of the developer's dollar bonds, if the company cannot extend its domestic debt, it will struggle to meet its obligations to external bondholders.

This bondholder, who wished to remain anonymous due to the sensitivity of the matter, described the situation as a gradual and concerning deterioration.

The primary concerns revolve around uncertainty regarding the broader economy and international tensions, particularly with Washington. They emphasized that the decisions being made at this moment will have repercussions for the company's prospects in the next five to ten years.

Country Garden, China's largest private developer in terms of sales, did not immediately respond to a request for comment from media.

The stress in the property market has put additional pressure on Beijing to implement support measures. It has also raised concerns about policymakers' ability to reverse the decline in China's overall economic growth.

A private survey conducted in August indicated that China's new home prices had fallen for the fourth consecutive month, reflecting low confidence due to the ongoing property debt crisis, despite various support measures.

On Friday, the central bank announced a 200 basis points (bps) reduction in the foreign exchange reserve requirement ratio (RRR) from 6% to 4%, effective from September 15. This move is seen as an attempt to slow the decline of the yuan.

Several major Chinese banks, including Industrial and Commercial Bank of China, China Construction Bank Corp, and Agricultural Bank of China, lowered deposit rates by varying amounts, as indicated on their respective websites.

Additionally, several mid-sized banks announced plans to reduce interest rates on a range of deposits by 10-25 basis points.

These measures contributed to improved market confidence, leading to a rally in property stocks, with China's CSI 300 Real Estate Index rising 2.4% in afternoon trade.

Furthermore, it was reported that major state banks would soon lower interest rates on existing mortgages after cutting deposit rates. Starting from September 25, first-time homebuyers with mortgages can apply to their banks for lower interest rates on their existing loans, according to announcements by China's central bank and financial regulator.

These deposit rate cuts mark the third round of such reductions within a year, with the current scale of cuts being more significant than those in June and September of the previous year.

Nicholas Zhu, a banking analyst at Moody's, noted that lower deposit rates would help offset some of the pressures on banks' narrowing net interest margins, a crucial profitability measure, particularly since a significant portion of Chinese banks' liabilities are in the form of deposits.

As of the end of June, China's mortgage loans amounted to 38.6 trillion yuan ($5.29 trillion), constituting 17% of banks' total loan portfolios.