The central bank's announcement on Friday of a cut in interest rates and banks' reserve requirement ratio (RRR) echoed a social media joke that had been circulating a few days beforehand.

The coincidence reflects market expectations for more policy easing amid a slowing economy, but it overshadowed the removal of the deposit rate ceiling, which was also announced Friday by the central bank. Widely considered a key move toward interest rate liberalization, the removal of the ceiling on deposit rates was actually the more important bit of financial news.

The interest rate and RRR cuts were announced a few hours after the market close on Friday, one day ahead of the first day of shuangjiang, or Frost's Descent, one of the 24 solar terms in the traditional Chinese lunar calendar. Shuangjiang is pronounced the same way in Mandarin as the word for dual cuts, also shuangjiang. So netizens were surprised by the announcement, coming as it did after a joke about a retail investor had made the rounds on social media.

The investor was initially excited by a colleague saying that shuangjiang would come on the weekend, but then disappointed to find that the colleague was referring to the calendar term rather than an easing of monetary policy by the central bank.

The joke also hinted at the widespread market expectations for continued policy easing to help revive the Chinese economy, which expanded in the third quarter at its slowest pace since the global financial crisis.

The rate cut could also be of pivotal significance in the context of rising deflationary pressures, which, coupled with cooling economic activity, adds to corporate debt service burdens.

However, the latest simultaneous cut in both interest rates and the RRR, the third time it has happened this year, also signifies that monetary policy is not powerful enough to spur an uptick in growth on its own. Tweaks to monetary policy need to be accompanied by the implementation of fiscal measures as well as structural reforms to put the economy back on track for recovery.

The announcement earlier in October by the National Development and Reform Commission that a flurry of infrastructure projects has been approved shows that the government is already enhancing fiscal support for a revival in economic growth.

Therefore, it is vitally important to see the central bank finally lifting the ceiling on deposit rates and moving closer to full liberalization of the country's financial regime. The announcement gives commercial banks the right to set deposit rates at will, laying the foundation for capital to be allocated among all market players in a more reasonable and efficient fashion.

The removal of the deposit rate ceiling also helps to dispel fears that real interest rates could turn negative as banks will now be able to set rates much higher than the country's consumer inflation, which eased to 1.6 percent year-on-year in September.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn