China is freeing up more than $100 billion to help its economy, which is facing fears of a slowdown and an escalating trade war.

The country's central bank said late Sunday that it is set to release as much as 700 billion yuan ($107 billion) into the financial system by reducing the amount of deposits that most commercial banks are required to hold.

The move to cut the requirement by half a percentage point comes as the Chinese government is dealing with an emerging trade war with the United States and concerns its economy is weakening faster than expected.

The reduction will encourage banks to lend additional cash to businesses and can generate more economic activity, analysts say. The cut is due to take effect on July 5, just one day before the United States and China plan to impose steep tariffs on tens of billions of dollars of each other's exports.

The central bank's move seems "likely to result in looser monetary conditions given signs that policymakers are becoming more concerned about the downside risks to economic activity from slowing credit growth," Julian Evans-Pritchard, senior China economist at research firm Capital Economics, said in a note to clients on Monday.

Yi Gang, the governor of the People's Bank of China, told that the central bank would "comprehensively use all kinds of monetary policy tools" to offset any slowdown in the economy.