On November 4, the People's Bank of China (PBOC) announced that, in order to maintain ample liquidity in the banking system, it would conduct a 700 billion yuan outright reverse repo operation on November 5, 2025. The operation will have a tenor of three months (91 days), utilizing fixed volume, interest rate tender, and multi-price awarding methods.
On November 4, the People's Bank of China (PBOC) announced that, in order to maintain ample liquidity in the banking system, it would conduct a 700 billion yuan outright reverse repo operation on November 5, 2025. The operation will have a tenor of three months (91 days), utilizing fixed volume, interest rate tender, and multi-price awarding methods. This move aims to stabilize market liquidity expectations and provide strong support for year-end liquidity management.
Earlier that morning, the PBOC also conducted a 7-day reverse repo operation worth 117.5 billion yuan, with an operation interest rate of 1.40%, unchanged from the previous rate. As 475.3 billion yuan worth of 7-day reverse repos matured on the same day, this resulted in a net withdrawal of 357.8 billion yuan. Although short-term liquidity showed a net withdrawal, when combined with the announced 700 billion yuan medium- to long-term operation on the same day, the overall policy stance still appeared accommodative, reflecting the 'combining short-term and long-term measures, using the long-term to supplement the short-term' approach to liquidity management.
On the same day, the PBOC also disclosed the central bank's liquidity tool deployment for October 2025: during the month, a net injection of 20 billion yuan was achieved through open market government bond purchases and sales, indicating that the PBOC is gradually restoring and strengthening the function of government bond purchases and sales as a routine liquidity adjustment tool.
On the same day, Lu Lei, Deputy Governor of the PBOC, stated at the 2025 International Financial Leaders Investment Summit that going forward, the PBOC will, based on domestic and international economic and financial conditions as well as financial market operations, carefully calibrate the level and pace of policy support, ensure the effective implementation and execution of various monetary policy tools, and fully unleash the effects of such policies.
He noted that since the beginning of this year, the People's Bank of China has implemented a moderately accommodative monetary policy and introduced a package of policy measures to create an appropriate monetary and financial environment to support robust economic development. First, reasonable growth in money supply and credit has been maintained; second, the comprehensive financing costs for society have been reduced; third, optimization and restructuring of credit allocation have been guided.
In its latest research report, CITIC Securities analyzed that liquidity conditions in October exhibited a 'loose early, tight later' pattern. Looking ahead to November, considering factors such as the issuance pace of government bonds, fiscal expenditure timing, and the PBOC’s government bond trading operations, it is expected that the liquidity gap will narrow to approximately 100 billion yuan. Given that the PBOC has recently resumed government bond trading operations, the clear intent of policymakers to safeguard year-end liquidity suggests that funding rates in November will remain low and volatile, while the market interest rate center will stabilize or decline slightly.
The recently published "Study Guide to the Proposal of the Central Committee of the Communist Party of China on Formulating the Fifteenth Five-Year Plan for National Economic and Social Development" featured an article by PBOC Governor Pan Gongsheng titled 'Building a Scientific and Robust Monetary Policy System and Comprehensive Macroprudential Management Framework.'
Pan Gongsheng emphasized in the article the need to optimize the mechanisms for base money issuance and intermediate variables of monetary policy to maintain reasonable growth in financial aggregates. He called for improving market-based mechanisms for interest rate formation, regulation, and transmission, enhancing the role of the central bank’s policy rates, narrowing the width of the short-term interest rate corridor, and further smoothing the transmission from the central bank’s policy rate to market benchmark rates and then to various financial market rates.
This article is reprinted from Wind Information; edited by Chen Xiaoyi of Zhitong Finance.