People's Bank of China Shifts Policy Rate to Stabilize Markets

The People's Bank of China shifted its main policy rate anchor to an overnight lending rate on November 2, 2026. As part of this transition, the central bank injected 541 billion yuan ($81.3 billion) into the banking system through overnight reverse repurchase agreements at a rate of 1.25%.

This move replaces the previous system of a single fixed rate for seven-day operations with multiple rates and the establishment of daily overnight reverse repos. The shift represents a targeted 15-basis-point reduction in the interest-rate floor for financial institutions, a measure designed to lower borrowing costs and stabilize profitability across the financial sector.

The policy change comes during a period of bond market instability triggered by credit concerns regarding the state-owned developer Zhuhai Huafa Group. In response to this turbulence in both stocks and bonds, the central bank and other Chinese regulators are meeting with financial institutions to determine which tools can best support capital markets.