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China stocks open higher after surprise RRR cut

SHANGHAI, April 18 (Reuters) - China stocks opened about 1 percent higher, led by the financial sector, after the central bank said it would cut banks' reserve requirements in a surprise move seen as supporting lender profits.

China's blue-chip CSI300 index rose 1.0 percent to 3,785.02 points at 1:30 GMT, while the Shanghai Composite Index gained 0.9 percent to 3,094.79 points. Hong Kong shares also gained with the Hang Seng index up 1.3 percent, to 30,444.18 points.

The CSI300 banking index was more than 1 percent higher.

The People's Bank of China said late on Tuesday it will reduce the cash banks hold as reserves, a move that frees up lending for small firms but falls short of broad monetary easing.

But the banks must use most of the freed-up liquidity to pay back relatively costly loans obtained via the central bank's medium-term lending facility (MLF).

"It is supportive of risk sentiment as banks profit is expected to improve with lower funding costs," wrote Tommy Xie, head of Greater China Research at OCBC Bank. (Reporting by Samuel Shen and John Ruwitch; Editing by Sam Holmes)

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