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# China's central bank makes its 1.25% overnight reverse repo rate the main policy rate from 2 November
- URL: https://www.theglobalbanker.com/chinas-central-bank-makes-its-1-25-overnight-reverse-repo-rate-the-main-policy-rate-from-2-november/
- Published: 2026-11-02T02:32:00.000Z
- Updated: 2026-11-02T04:54:57.000Z
- Description: The People's Bank of China begins daily overnight reverse repo tenders at 1.25%, 15 basis points below the seven-day rate, as the overnight rate becomes its main policy rate.
- Author: TGB Editorial Team
- Tags: Central Banks, Asia-Pacific, #newsroom, #needs-photo

The People's Bank of [China](https://www.theglobalbanker.com/market-china/) (PBOC) starts overnight reverse repo tenders every working day from 2 November, using a fixed-rate, quantity-based auction at an operating rate of 1.25%. With the change, the overnight reverse repo rate becomes the central bank's main policy rate, putting into practice a proposal by Governor Pan Gongsheng.

The PBOC's open market operations room announced the switch on 30 October and disclosed the overnight rate for the first time. It sits 15 basis points below the seven-day reverse repo rate of 1.40%, which the announcement did not change.

## HOW THE TOOLKIT CHANGES

Seven-day reverse repo operations move to a fixed-quantity, interest-rate tender with multiple winning bid rates, and will be held mainly around tax payment periods and month-ends, the PBOC said. Tools that were priced at a spread to the seven-day rate, including temporary repo and reverse repo operations and repo facilities for overseas central bank-type institutions, will be priced off the overnight rate with the spreads unchanged.

Overnight reverse repo operations debuted in late June. The PBOC had earlier said it would run them daily from 21 October to 2 November.

## A STEP TOWARDS OTHER CENTRAL BANKS

A reverse repo is a short-term loan from the central bank to commercial banks, secured against bonds. The switch is part of a decades-long effort to move China's interest-rate system away from a centrally planned framework and closer to other major central banks.

Zhou Hao, chief economist at Guotai Junan International, called the announcement arguably the clearest signal yet that the PBOC is moving towards an overnight-rate operating system like those of the Federal Reserve, the European Central Bank and the Bank of Japan.

## ANALYSTS WEIGH THE EFFECT

Wang Qing, chief macro analyst at Golden Credit Rating, cautioned that moving the policy anchor is not an implicit rate cut. The PBOC has also refrained from linking the shift with looser policy. Goldman Sachs economists wrote that although it is not a conventional 15 basis-point cut, the transition effectively increases interbank liquidity and lowers yields across the bond curve, all else equal.

China's 10-year government bond yield slipped to 1.63% from 1.64% just before the decision was announced on Friday. Separately, the PBOC is due to meet the NFRA, the CSRC and major banks on Monday to discuss measures to support the capital market, according to Newsquawk, citing Cailian and unnamed industry sources.

## THE TGB VIEW

China's banking institutions held RMB 498tn of assets at end-June 2026, and the six large state-owned commercial banks, from ICBC to Postal Savings Bank of China, held RMB 221.6tn, about 45% of the total. A CITIC Securities team led by Ming Ming has said to watch the size of the daily overnight injections from 2 November and the first supplementary seven-day operation in the mid-November tax period.