China's central bank plans to make the overnight reverse repo rate its main policy rate: what Pan Gongsheng said on October 19, 2026

China's central bank will study moving its main market operations to an overnight term "at an appropriate time," and the overnight reverse repo rate would then become its main policy rate, Governor Pan Gongsheng said on Monday, October 19, 2026, at the Financial Street Forum in Beijing. The overnight rate would replace the seven-day reverse repo rate, which has been the main policy benchmark since 2024 and has stayed at 1.4% since May 2025.

Pan gave no date for the switch. In the same speech he announced a liquidity tool for fund managers and other non-bank institutions hit by large redemptions, and a wider list of institutions that can borrow from the central bank's Standing Lending Facility. China's 30-year government bond yield fell more than 1 basis point after the remarks, Reuters reported. A basis point is 0.01 percentage point.

What the switch would change

A reverse repo is the central bank lending cash to banks for a fixed period, with bonds as collateral. The People's Bank of China (PBOC) now signals its stance through the rate on seven-day loans. Pan said the overnight interbank repo rate has in effect already become the rate the PBOC steers, so the change would make the official policy rate match the one it manages day to day. We explained that earlier shift, when the overnight rate became the PBOC's working target, in our August 2026 article.

The two short rates are close. When the PBOC ran its first overnight reverse repo in June, it did not publish the rate, and sources told Reuters it was 1.25%, below the seven-day rate. The one-year loan prime rate, the benchmark banks use to price most loans, is 3.0%. Reuters expects the October fixing on Tuesday, October 20, to leave the loan prime rates unchanged for a 17th month.

How China's policy rate got here

1. 2024: the seven-day reverse repo rate became the PBOC's main policy rate.
2. May 2025: the seven-day rate was cut to 1.4%, where it has stayed.
3. June 2026: the PBOC began overnight reverse repo operations, at a rate of 1.25% according to sources cited by Reuters.
4. October 19, 2026: Pan said the overnight reverse repo rate will become the main policy rate once main operations move to overnight.

A backstop for bond-fund runs

The second measure targets a problem China's bond market has had before. When many investors pull money from bond funds and wealth-management products at the same time, managers have to sell bonds, prices fall, and more investors redeem. Pan said the PBOC will set up a liquidity tool with the National Financial Regulatory Administration and the China Securities Regulatory Commission for that situation.

The tool would be used only when asset managers face a shared liquidity squeeze or the bond market falls into a cycle of redemptions and forced sales, Chinese financial media reported. Borrowers must meet macroprudential rules and post high-grade collateral, which the PBOC said is meant to avoid distorting prices or creating the belief that it will always step in. Bank wealth-management units, mutual fund managers and their parent banks and brokerages would be eligible. Caixin reported in June that the idea followed earlier stress, including the late-2022 redemption wave in wealth-management products and a bond-fund selloff in the third quarter of 2025.

Pan also said the PBOC will run pilots that make it easier for overseas financial institutions to buy and sell yuan in the onshore foreign exchange market.