China monetary policy and financial reforms

The People’s Bank of China (PBoC) has initiated a series of measures to stimulate economic growth and reform financial market structures.

In late September 2026, the PBoC announced significant monetary stimulus, including a 25 basis point reduction in the one-year Pledged Supplementary Lending (PSL) rate from 1.75% to 1.5%. The bank expanded PSL scope to include infrastructure such as water, power, and logistics, while increasing re-lending quotas for technological innovation, agriculture, and small businesses. To support the housing market, a national mortgage interest subsidy policy was introduced, providing a 1% annual interest subsidy for up to five years on qualifying first-time homebuyer commercial mortgages for homes under 120 square meters and priced below 1.5 million yuan.

By late October 2026, the focus shifted toward structural reforms. Governor Pan Gongsheng proposed transitioning primary open market operations to overnight reverse repos to establish a new main policy rate. This transition was finalized with the PBoC setting the overnight reverse repurchase agreement rate at 1.25%, which is lower than the 1.4% seven-day benchmark rate. The bank also moved toward conducting daily overnight reverse repo operations and implementing multiple rates for seven-day transactions.

Additional reforms include introducing liquidity support tools for non-bank financial institutions to manage bond market redemption risks, diversifying loan pricing benchmarks, and piloting a program to allow eight domestic and foreign RMB clearing banks to conduct proprietary trading in the domestic interbank foreign exchange market.