Business · Economy · 1 hr ago
China’s Central Bank Makes Overnight Repos Its Main Short-Term Policy Tool
China’s central bank began daily overnight reverse-repo operations on Nov.
2 as part of a new approach to managing short-term interest rates.
The operation rate is currently 1.25%, and the central bank will set the rate while inviting banks to bid for the amount of funding they need.
Seven-day reverse repos will mainly be used around tax deadlines and month-end, with a different bidding method.
For years, seven-day operations were the central bank’s main tool, even though the overnight rate between banks had become its practical target.
The change brings the main tool closer to the rate policymakers seek to guide, making short-term policy signals clearer and allowing funding to be adjusted more quickly.
The central bank plans to use seven-day operations during the tax period in mid-November, while daily overnight operations continue.
China’s central bank is making overnight reverse repos its main short-term policy tool.
The People’s Bank of China said daily overnight operations would begin on November 2, 2026, at a current rate of 1.25%.
Seven-day reverse repos will mainly be used around tax periods and month-end.
The changes align the main open-market operation with the overnight rate already used as the target rate in the interbank market.
The central bank said the adjustments are intended to improve the precision of short-term interest-rate management.
- Who
- The People’s Bank of China.
- What
- It is making daily overnight reverse repos its main short-term policy tool and changing how seven-day reverse repos are conducted.
- When
- The changes begin on November 2, 2026.
- Where
- China.
- Why
- To improve the precision of short-term interest-rate management and align the main operation with the interbank overnight target rate.
This story does not have two clearly opposing sides.
The People’s Bank of China announced changes to its open-market operations, effective November 2.
The central bank began daily overnight reverse repo operations under the revised framework.
The central bank was scheduled to conduct seven-day reverse repo operations during the tax period.
- Overnight reverse repo rate
- 1.25%
- Daily overnight operations begin
- November 2, 2026
- Seven-day operations
- Mainly around tax periods and month-end
- Interbank overnight repo rate
- DR001
- Previous main operation term
- Seven days, used routinely since 2014
3 sources
What people are saying
From the current situation, the interbank overnight repo rate (DR001) has in fact become the target rate for monetary policy regulation.
The seven-day reverse repo operation rate will give up the position of the main policy rate, and the seven-day reverse repo operation will instead serve to fill liquidity gaps at specific times such as across tax periods and month-end.