China stepped up measures to boost the country's faltering economy on Friday, with top banks paving the way for further cuts in lending rates and authorities reducing the amount of funds institutions need to hold in foreign exchange reserves.

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China is grappling with a slowdown that has rattled global markets, with the spotlight now firmly focused on troubled developer Country Garden's (2007.HK) spiralling debt crisis in a sector that contributes to roughly a quarter of the economy.

As pressure mounts, Chinese authorities have rolled out a series of measures to spur the economy and revive the crisis-hit property market, with steps including the easing of some borrowing rules and a cut to the amount of foreign exchange banks must hold as reserves.

On Thursday, Country Garden delayed a deadline for creditors to vote on whether to postpone payments for an onshore 3.9 billion yuan ($537 million) private bond until Friday 1400GMT to give bondholders "sufficient time" to prepare for the vote.

The vote is a key hurdle Country Garden faces as it strives to avoid default, with one holder of the developer's dollar bonds saying if the company cannot extend its domestic debt, it will be unable to service external bondholders.

"This has been a slow-moving car crash," said the bondholder, who declined to be identified due to the sensitivity of the issue, adding that concerns centred around uncertainty over the broader economy and tensions with Washington.

"Everything they do right now is going to have an impact five to 10 years down the line."

Country Garden, China's largest private developer by sales, did not immediately respond to Reuters request for comment.

Stress in the property market has intensified pressure on Beijing to implement supporting measures and fanned concern about the ability of policymakers to arrest a decline in China's broader economic growth.

China's new home prices fell for the fourth month in August, according to a private survey on Friday, as the property debt crisis kept confidence at a low ebb despite the string support measures.

DEPOSIT RATES CUT

The central bank said on Friday it would cut the foreign exchange reserve requirement ratio (RRR) by 200 basis points (bps) to 4% from 6% beginning Sept. 15, a move seen aimed at slowing the pace of yuan declines.

The lenders lowering mortgage rates on Friday included Industrial and Commercial Bank of China (601398.SS), , China Construction Bank Corp (601939.SS) and Agricultural Bank of China (601288.SS), which cut their deposit rates by between five and 25 basis points, websites from each bank showed.

The measures helped lift confidence in the market and battered property stocks rallied, with China's CSI 300 Real Estate Index (.CSI000952) up 2.4% in afternoon trade.

Three sources familiar with the matter told Reuters on Tuesday that major state banks would cut deposit rates as they prepare to lower interest rates on existing mortgages soon, part of Beijing's efforts to revive the debt crisis-hit property sector.

Starting from Sept. 25, first-time home buyers with mortgages can apply to their banks for a lower interest rate on their existing loans, China's central bank and financial regulator announced on Thursday.

Two of China's biggest cities, Guangzhou and Shenzhen, also eased mortgage curbs this week, broadening the definition for home buyers to enjoy preferential loans for first-home purchases.

The lenders cut rates on one-year time deposits by 10 basis points (bps) to 1.55%, and two-year time deposit by 20 bps and three-year and five-year time deposits by 25 bps.

The deposit rate cuts are the third such cuts within a year, with the scale of cuts bigger than previous rounds in June and in September last year.

Lower deposit rates will partially offset various pressures on banks' narrowing net interest margins - a key gauge of profitability, said Nicholas Zhu, a banking analyst at Moody's.

"The impact of the deposit rate cut is material, given that close to three-quarters of Chinese banks' liabilities are deposits," Zhu said.

Several China's midsized banks, including Industrial Bank Co Ltd (601166.SS) and China Bohai Bank Co Ltd (9668.HK), also announced they will start cutting interest rates on a range of deposits from Friday by 10-25 basis points.

China's mortgage loans totalled 38.6 trillion yuan ($5.29 trillion) at the end of June, representing 17% of banks' total loan books.

($1 = 7.2633 Chinese yuan renminbi)

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