The People's Bank of China conducted a 224 billion yuan 7-day reverse repo operation on July 13th via a fixed-rate, quantity tender method, fully meeting the demand of primary dealers. The operation rate was maintained unchanged at 1.40%. With 7 billion yuan in 7-day reverse repos maturing on the same day, this resulted in a net injection of 217 billion yuan on an open market reverse repo basis.
Looking at the previous week (July 6th to July 10th), the People's Bank of China cumulatively conducted 62 billion yuan in 7-day reverse repos, while 678.5 billion yuan matured over the same period, leading to a net withdrawal of 616.5 billion yuan via reverse repos. Additionally, on July 6th, the central bank also conducted a 1 trillion yuan 3-month outright reverse repo operation. After offsetting 800 billion yuan in maturing 3-month outright reverse repos, this resulted in a net injection of 200 billion yuan.
Tan Yiming, Chief Fixed Income Analyst at Tianfeng Securities, noted that liquidity conditions remained balanced and loose last week. The net withdrawal via 7-day reverse repos aligned with typical operational patterns at the start of a quarter. The net injection via the 3-month outright reverse repos signaled the central bank's proactive stance in supporting market liquidity. This week, the main disruptions to liquidity are expected from increased net government bond payments and tax-related outflows later in the week. It is anticipated that the People's Bank of China will conduct precise counteractive operations, and overall pressure is expected to be manageable.
From the perspective of Sun Binbin, Chief Economist at Caitong Securities, the central bank's operations show a trend of "shortening the short end and lengthening the long end." Short-term funds that were intensively injected around the quarter-end last week naturally matured. The 3-month outright reverse repo was rolled over in excess, with a net injection of 200 billion yuan locking in medium-to-long-term liquidity. Seasonally, the first and middle parts of July have often seen net withdrawals in past years, which is a normal pattern of short-term fund withdrawal after the quarter-end and does not indicate a tightening of liquidity. As liquidity disruptions increase this week, the People's Bank of China may ramp up its open market operations.
Recently, the Monetary Policy Committee of the People's Bank of China held its second-quarter meeting for 2026. The meeting emphasized the need to "continue implementing a moderately accommodative monetary policy and intensify counter-cyclical and cross-cyclical adjustments." Compared to the first-quarter meeting, the statement for the next stage of monetary policy added the phrasing "enhance policy foresight, flexibility, and targeted effectiveness," while removing the expression "comprehensively utilize various tools to strengthen monetary policy regulation."
An analysis from Everbright Securities suggests this implies the regulatory approach may place greater emphasis on "forward-looking planning, discretionary action, and targeted support." This means that, while maintaining a moderately accommodative stance at the aggregate level, the central bank will manage the pace of tool deployment, arrange stabilizing measures in advance to anchor market expectations, and better smooth out volatility. Monetary policy tools will be employed with discretion to avoid prolonged excessive liquidity conditions. Simultaneously, there will be a shift away from broad-based stimulus towards strengthening structural guidance, directing resources towards key areas such as expanding domestic demand, technological innovation, and small and medium-sized enterprises. In the near term, the probability of reserve requirement ratio cuts or interest rate cuts is relatively low.
Sun Binbin stated that the monetary policy stance remains "moderately accommodative," and the likelihood of implementing broad-based policy tools in the short term is expected to decrease.