The PBOC decided Friday to cut the reserve requirement ratio (RRR) by 1 percentage point in a move to increase loan funding sources of small, micro, and private businesses.
The cut in banks' reserve requirement ratios is the fifth such move over the past year as the economy also faces mounting pressure from USA tariffs.
China's central bank will further encourage financial institutions to support private enterprises, especially small and micro-sized firms in 2019.
In 2018, China reduced RRRs four times to free up funds for banks to lend.
Liao Zhiming, an analyst at Tianfeng Securities, wrote that the move could unleash as much as 700 billion yuan of funds, while analysts at China International Capital Corporation expected the change to release only 400 billion yuan of liquidity.
Li added that China will also step up countercyclical adjustments of macro policies and further cut taxes and fees.
Global stock markets sold off on Thursday after a warning from tech giant Apple Inc about slowing China sales, while data this week showed manufacturing activity shrank in December for the first time in more than two years.
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PBOC's targeted liquidity support to certain institutions for special goal use - such as providing long-term cheap funds to the China Development Bank to finance subsidised housing - has edged towards bankrolling projects favoured by the government.
"The economy is weak and stimulus needs to arrive quickly", economists at ING said in a note earlier this week.
The cuts will be effective January 15 and January 25, and come ahead of the long Lunar New Year celebrations when cash conditions often get tight.
The latest easing sign came on Wednesday evening, when the PBoC adjusted a rule to boost the impact of previous RRR cuts. One big wild card is how the trade war between the United States and China will play out in 2019.
But the central bank said growth was still within a reasonable range and it would continue to implement a prudent monetary policy, without engaging in massive stimulus.
In addition to monetary policy easing, last week China allocated its local government debt quota "ahead of schedule" to accelerate infrastructure spending.
Still, economic growth is thought to have cooled to around 6.5 percent past year - which would be the weakest since 1990 - in line with the target but down from 6.9 percent in 2017.