For the ninth consecutive month, the central bank conducted a 1 trillion yuan Medium-term Lending Facility (MLF) operation today.

    Today, the central bank conducted a 1 trillion yuan Medium-term Lending Facility (MLF) operation with a one-year maturity. Given that 900 billion yuan of MLF will mature in November, the central bank's net MLF injection for the month will reach 100 billion yuan, marking the ninth consecutive month of increased MLF rollovers.

    Multiple industry insiders told Cailian Press that as the year draws to a close, the central bank has consistently demonstrated a moderately accommodative monetary policy stance. This is driven by two key factors: first, a significant increase in net government bond financing in November; and second, a notable rise in maturing interbank certificates of deposit during the same period, both requiring liquidity support from the central bank.

    Looking ahead to potential year-end monetary policy operations, experts note that while moderate easing still has room for implementation in the near term, its marginal effectiveness has notably diminished. Potential negative consequences of excessive monetary and financial loosening—such as idle capital and heightened capital market volatility—also warrant attention. Markets should temper expectations for substantial reserve requirement ratio cuts or interest rate reductions in the near future.

    The central bank has conducted nine consecutive months of increased MLF operations, continuously injecting medium-term liquidity into the banking system.

    To maintain ample liquidity in the banking system, the central bank conducted 1 trillion yuan in one-year Medium-term Lending Facility (MLF) operations through fixed-amount, fixed-rate, multiple-bid auctions. Since November, the central bank has conducted two rounds of outright reverse repurchase operations in the open market, cumulatively injecting a net 500 billion yuan. Overall, the combined use of MLF and outright reverse repurchase agreements released 600 billion yuan in medium-term liquidity in November, matching the previous month's net injection.

    Regarding the central bank's continued demonstration of a moderately accommodative monetary policy stance, Wang Qing, chief macro analyst at Orient Gold Credit, told Cailian Press that: First, the allocation of 500 billion yuan in local government debt issuance quotas in October, aimed at resolving existing debt and expanding effective investment, implies an additional 500 billion yuan in local bonds will be issued before year-end, leading to a significant increase in net government bond financing in November. Second, the 500 billion yuan in new policy-based financial tools deployed in October, after driving up entrusted loans for the month, will also spur faster disbursement of supporting medium-to-long-term loans.

    “Additionally, the volume of maturing interbank certificates of deposit in November has increased significantly. All these factors will tighten liquidity in the banking system to some extent, requiring liquidity support from the central bank,” Wang added.

    Dong Ximiao, chief researcher at Zhonglian, told the Financial News that November and December mark the critical period for wrapping up annual tasks. “As the year draws to a close, the central bank has resumed government bond trading to inject long-term liquidity into the banking system. It is timely and necessary to maintain ample market liquidity through various monetary policy tools, thereby guiding financial institutions to increase credit issuance.”

    Currently, the central bank's methods for injecting medium-to-short-term liquidity have largely stabilized: conducting 3-month outright reverse repos around the 5th of each month, 6-month outright reverse repos around the 15th, and MLF operations around the 25th. China's third-quarter 2025 Monetary Policy Implementation Report indicates that during that period, outright reverse repos and MLF operations collectively injected a net 1.5 trillion yuan, providing robust support to maintain ample market liquidity.

    “Notably, amid recent macroeconomic downturns, the central bank's decision to increase MLF operations signals sustained quantitative policy support. This continuous injection of medium-term liquidity into the banking system reinforces monetary policy's accommodative stance, aiding growth stabilization and confidence maintenance,” Wang Qing stated.

    Monetary Easing Still Has Room; Reserve Requirement Ratio Cuts and Interest Rate Reductions May Be Delayed

    “While there remains some room for implementing moderately accommodative monetary policy in the near term, its marginal effectiveness has clearly diminished. Potential negative effects from excessive easing of monetary and financial conditions—such as idle capital and heightened capital market volatility—also warrant attention,” Dong Ximiao noted, suggesting the market should lower expectations for significant reserve requirement ratio cuts or interest rate reductions in the next phase. Going forward, monetary policy is expected to prioritize precision, coordination, and balance.

    Wen Bin of China Minsheng Bank told the Financial News that while the third-quarter monetary policy implementation report maintained a dovish stance, it emphasized “enhancing countercyclical and cross-cycle adjustments to improve macroeconomic governance efficiency.” The renewed emphasis on “cross-cycle” adjustments signifies that monetary policy will balance short-term growth stabilization with medium-to-long-term structural adjustments. While policies will support year-end economic growth, their intensity may be relatively prudent, prioritizing structural optimization and guiding efforts toward key sectors. This approach aligns with the direction outlined in the draft proposals for the 15th Five-Year Plan, aiming to foster an economic model driven more by domestic demand, consumption, and endogenous growth. It also seeks to deepen reforms in critical areas to support sustainable and healthy economic development.

    “Considering the need to further consolidate the foundation for the current economic recovery, the demand for a strong start in the opening year of the 15th Five-Year Plan, and the signal of ‘implementing more proactive macro policies’ released in the draft proposal, there remains room for more substantial monetary easing. However, the timing may be delayed, with the ‘double cut’ (interest rate and reserve requirement ratio reductions) potentially implemented in the first quarter of 2026,” Wen Bin stated.

    However, Wang Qing believes that the central bank will comprehensively utilize two policy tools—outright reverse repos and MLF—to continuously inject medium-term liquidity into the market, while not ruling out the possibility of a reserve requirement ratio cut. “The core strategy involves bolstering fiscal measures, easing monetary policy, and intensifying efforts to stabilize the real estate market. This approach will anchor macroeconomic performance in the fourth quarter and Q1 next year, ensuring the achievement of this year's growth targets while setting a solid foundation for the 15th Five-Year Plan. A reserve requirement ratio cut could also address liquidity needs during the Spring Festival period. Consequently, amid expectations of substantial long-term liquidity injections through an RRR cut, a corresponding contraction in net medium-term liquidity injections around year-end cannot be ruled out.”