China's stock markets tumbled on Monday, as investors were unnerved by the central bank's decision to slash the amount of cash that the country's lenders must hold as reserves, in a bid to help spur economic growth.

The announced measures on Sunday to cut the reserve requirement ratio (RRR) — or the amount of cash that most commercial banks need to set aside at the central bank.

The move, the central bank's fourth in 2018, came amid concerns about the economic impact of Beijing's ongoing trade war with Washington.

The RRR currently stands at 15.5 percent for large institutions and 13.5 percents for smaller banks, and will be cut by 100 basis points from Oct. 15, the central bank said.

One economist said the move was not really a surprise.

"We were expecting that we would see a triple-R cut in October for a number of reasons," Sian Fenner, senior economist at Oxford Economics, told CNBC's "Street Signs" on Monday.

"They clearly want to boost liquidity," she said. "This month we've got tax repayments, we've also got some maturing of some debt but also, they want to make sure that they're increasing their credit growth which has been quite sluggish ... because of earlier deleveraging of financial risks."

It is important for Beijing to manage those risks for longer term growth, she said, adding that "the focus is now on growth."

With the increase in U.S. tariffs likely to start "being a drag" on Chinese exports, Fenner said Beijing wants to "shore up and provide some support for domestic demand."

Other market observers, however, said the cuts were bigger than expected.

A cut of 1 percent by the Chinese central bank was unexpected because it would "release something like 700 billion yuan (approximately $101.72 billion)" into the country's banking system, Francis Lun, the CEO of Geo Securities, told CNBC.

"That is quite a lot of money going around," Lun said. "I think ... the government's really worried that the economy will slow down and the stock market will tank."

On the back of the central bank's announcement, China's mainland markets traded in negative territory for much of their first trading day following the Golden Week holiday. Both the Shanghai composite and the Shenzhen composite fell more than 3.7 percent by the end of the trading day.

The Shanghai composite usually sees gains after the week-long holiday. According to Chinese financial services firm Wind Information, the Shanghai composite has closed higher on the first day of trading after the national holiday for the past five years. In all, seven out of the last 10 years saw higher closes on the first post-holiday session.

Shares of all the major Chinese banks also fell in the aftermath of the PBOC decision. At the end of the trading day, the was lower by 3.64 percent, tumbled 4.28 percent while lost 2.57 percent.

Commenting on the market moves, Lun said the Chinese stocks were playing "catch-up on last week's falling market," with Hong Kong's Hang Seng index falling by around 1,216 points while other Asian emerging markets "fell sharply."

— CNBC's Evelyn Cheng and Reuters contributed to this report.