The People's Bank of China (PBOC) said it would cut the reserve requirement ratio by 0.25 percentage points starting March 27, which would allow commercial banks to lend more to businesses.
This brings the weighted average ratio for financial institutions to around 7.6 percent.
The PBOC said the latest cut was intended to "improve the level of service to the real economy".
The rate was last cut in November, when the world's second-largest economy was heavily hit by strict Covid-19 curbs.
China is still grappling with the fallout of its zero-Covid policy, which included harsh lockdowns and mass business closures, hitting supply chains and employment.
The country has set an economic growth target of "around five percent" for 2023, one of the lowest in decades.
Authorities reported a rebound in retail sales in January and February, after the country abandoned zero-Covid controls and a massive exit wave of infections quickly subsided.
But Premier Li Qiang has warned that the growth target was "not easy" to achieve as a grinding property crisis continued and global demand slowed.
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