The People's Bank of China, China's central bank, may cut reserve requirment ratios (RRR) for medium- and small-sized banks to spur lending to small businesses, the Economic Observer newspaper reported on its website on Thursday, citing "unidentified analysts".

China has ordered banks to include their margin deposits in required reserves at the central bank in the latest move to mop up excessive liquidity, sources told Reuters earlier.

The Economic Observer said the move would squeeze small lenders' abilities to extend loans since margin deposits accounted for about 20 percent of total deposits at small banks.

China's RRR for small banks now stands at 19.5 percent, lower than the 21.5 percent for big banks.