China’s central bank just made its most significant monetary plumbing upgrade in years. The People’s Bank of China announced plans to expand overnight reverse repurchase operations, a tool designed to give the bank finer control over short-term interest rates and liquidity in the world’s second-largest economy.
The announcement came during the Lujiazui Forum in Shanghai, where PBoC Governor Pan Gongsheng laid out a framework that narrows the bank’s policy interest rate corridor from 70 basis points to 50 basis points.
How the new framework works
The PBoC’s seven-day reverse repo rate currently sits at 1.40%, after a 10-basis-point cut in May 2025. The new overnight reverse repo rates will be set at 25 basis points above and below that benchmark, creating a tighter band within which overnight interbank rates are expected to trade.
When overnight borrowing costs (tracked by a rate called DR001) drift too far from where the PBoC wants them, these new operations kick in to pull things back into line. The corridor shrinks from 70 to 50 basis points, which means less room for rates to wander before the central bank intervenes.
