China's central bank said it had injected 17 billion yuan ($2.8 billion) into the domestic banking system on Tuesday after a liquidity squeeze rocked financial markets in the world's second-largest economy last month.

The People's Bank of China injected the cash into the domestic interbank market by offering seven-day reverse repurchase agreements, it said in a statement. It was the first such move since February.

The bank regularly conducts open market operations, including offering bills and repurchase agreements, on Tuesdays and Thursdays to adjust liquidity levels in the interbank market.

It had not conducted any open market operations since late June, when it drained liquidity from the market in a crunch that sent the interest rates banks charge to lend to each other to record highs.

That increased worries that banks could tighten credit, which could hamper the ailing domestic economy, and caused days of turmoil in Chinese financial markets.

Analysts said the central bank's latest cash injection indicated its intention to ease liquidity conditions in the banking system.

"The central bank is paying attention to liquidity conditions, indicating its stance that it will try to fix any liquidity issues that might occur," Sinolink Securities analyst Tao Jinggang told AFP.

The news helped boost sentiment on mainland stock markets, with the benchmark Shanghai Composite Index up 0.7 percent on Tuesday.