Back to the Blog Main Page
17/06/26
50
PBOC Tightens Overnight Rate Control and Expands Yuan Offshore Use
The People’s Bank of China said it will step in if the overnight money market rate stays persistently away from its operating rates, underscoring its intent to keep short-term funding conditions broadly aligned with policy settings. The central bank also said it will adjust the timing of temporary overnight reverse repurchase agreements and outright repurchase agreement operations to 3:00 p.m. to 3:30 p.m., aiming to improve flexibility and execution in open market operations.
Under the new framework, the operating rates for temporary overnight reverse repos and outright repurchase agreements will be set 25 basis points below and above the seven-day reverse repo rate, respectively. Officials indicated that intervention will be triggered if the overnight money market rate remains consistently below or above those levels, suggesting a more active mechanism for managing liquidity conditions at the short end of the curve.
The central bank also outlined measures to broaden the use of yuan liquidity facilities for overseas official institutions. Through the FIMA RMB repo facility, eligible foreign central bank-type institutions will be able to access yuan funding against high-quality yuan-denominated collateral. Acceptable assets will include top-tier yuan bonds, among them Chinese government bonds. The move is designed to support cross-border yuan usage and improve the currency’s availability in offshore markets.
In a further sign of China’s effort to deepen international use of the yuan, the authorities said they will issue an action plan to develop offshore finance within the Shanghai International Financial Center. The plan is expected to expand the currency’s role in offshore business activities and strengthen Shanghai’s position as a financial hub.
The central bank also said Shanghai will study the feasibility of establishing offshore banks, pointing to a broader policy push to build infrastructure that can support yuan internationalization. Together, the measures suggest Beijing is seeking to reinforce monetary control at home while advancing the yuan’s global footprint through new offshore channels.
Promotions
