China's Central Bank Says It Will Study Making an Overnight Rate Its Main Policy Rate

Analysis

People's Bank of China Governor Pan Gongsheng said on October 19 that the bank will study switching its main market operation from seven days to overnight, so that an overnight repo rate becomes its main policy rate. He also set out plans to retire the old benchmark deposit and lending rates and to widen emergency lending. He gave no date and announced no change in the level of rates.

Pan, who heads the People's Bank of China (PBOC), the central bank, gave the keynote at the 2026 Financial Street Forum annual conference in Beijing. The State Administration of Foreign Exchange, which is administered by the PBOC, published the official text of Pan's speech.

What the governor said

Everything below is the governor's own statement of plans and views (CLAIMED BY PBOC). None of it is yet an announced rule.

A shorter main operation, under study. "We will study switching, at an appropriate time, the tenor of the central bank's main open-market operation to overnight, and the open-market overnight repo rate will accordingly become the main policy rate" (AA translation). Pan gave the reason as improving "the precision of interest-rate control".

The market already targets overnight. Pan said the interbank overnight repo rate "has in effect become the target rate" of monetary policy, while the main operation and the main policy rate are still seven days. "The two are not fully consistent," he said (AA translation).

Retiring old benchmark rates. The PBOC will push for the remaining uses of financial institutions' benchmark deposit and lending rates to be replaced by market-based rates, so that it can exit them. Pan said these benchmarks have not been adjusted since October 2015 and no longer function in practice in deposit and loan pricing.

Loans priced off more than one benchmark. Loan pricing would move from relying fairly singly on the loan prime rate (LPR), the monthly rate banks quote for their best borrowers, toward "more diversified" benchmarks.

A wider emergency window. The Standing Lending Facility (SLF), collateralised central-bank loans with overnight, 7-day and 1-month terms, now serves mainly city commercial banks and rural lenders. Pan said it will be extended to foreign-funded banks incorporated in China, with national banks under the same arrangements, to cover all domestic deposit-taking institutions.

A backstop for non-banks. With the financial regulator and the securities regulator, the PBOC will set up a liquidity tool for non-bank institutions facing large redemptions. The Beijing municipal government portal carries the same two measures. The speech gives no size for the tool.

Currency. "China has neither the need nor the intention to gain trade competitive advantage through currency depreciation," Pan said, adding that the PBOC exited routine foreign-exchange intervention after 2017. He said it still uses macroprudential tools in specified circumstances and may intervene directly in extreme circumstances (AA translation).

Other items with numbers. A planned pilot would let 8 Chinese and foreign offshore yuan clearing banks trade for their own account in the onshore interbank currency market. Institutions operating the digital yuan, China's central bank digital currency, have grown from 10 to 30.

Why the length of a loan matters

Start with how a central bank sets interest rates in practice. It does not order every bank to charge a rate. It lends cash to banks for short periods against collateral, in what is called a reverse repo (the central bank buys securities and agrees to sell them back later). The operation's rate is a policy rate: an anchor the central bank uses to guide, rather than mechanically fix, the rates at which banks lend to one another.

Today the PBOC's main operation runs for seven days. But Pan says the rate the bank actually steers is the overnight rate between banks. The tool and the target measure different lengths of time.

An analogy: it is like setting a thermostat in the hallway when the thermometer you care about is in the bedroom. Moving the main operation to overnight puts the control and the reading in the same room. The analogy breaks down in one way: a thermostat needs only one setting, while a central bank also manages a corridor, a range within which market rates are expected to move.

A brief detour: the PBOC has been moving in this direction for two years. In a June 2024 keynote at the Lujiazui Forum in Shanghai, archived by the State Administration of Foreign Exchange , Pan said the bank could consider making one short-term operating rate its main policy rate, and that the 7-day reverse repo rate "has basically assumed this function" (AA translation). He added that this might need a moderately narrower rate corridor. The October 19 speech goes a step shorter, to overnight.

The causal chain

Observed: the governor stated a plan to study an overnight main operation → stated plans to retire benchmark rates, widen the SLF and create a non-bank liquidity tool.

Conditional steps (not yet observed):

Short-term rates. If the PBOC makes the switch, the overnight repo rate becomes the published anchor, and day-to-day swings in interbank rates could narrow around it. How much depends on the corridor width, which the speech does not set.

Borrowers. If loans move off the LPR toward several benchmarks, the rates some firms and households pay could track market rates more closely. The speech does not say which loans or when.

Funds and markets. Pan said the tool is intended to interrupt a redemption-and-selling feedback loop (CLAIMED BY PBOC). Whether it reduces forced selling is conditional on the final design, scale and use.

What is not justified: the speech announces no cut or rise in rates, no date for the switch and no size for the new tool. It does not show how the yuan, Chinese bonds or Chinese stocks will move. The digital-yuan figures concern a central-bank currency, not any cryptocurrency, and give no basis for a token-related conclusion. The formal change may largely align the named instrument with an overnight target the governor says already exists; it does not itself prove easier or tighter policy, less volatility, stronger transmission, or a market-price direction.

Counter-case

This may change less than it sounds. "Study" and "at an appropriate time" are words of intent, not a decision. Pan's own account says the market already targets overnight rates, so a formal switch could mostly relabel how the bank already works. Several plans in the speech, such as the non-bank tool, have no size, start date or final operating rules yet.

What the evidence does not show

When, or whether, the switch to overnight will happen.

Which contracts still use the 2015 benchmark rates, and how much money they cover.

How large the non-bank liquidity tool will be, when it will start, and what its final eligibility and activation rules will be.

What we're watching

A PBOC notice that names the overnight operation's rate or changes its open-market operation announcements.

Rules for the non-bank liquidity tool and the expanded SLF.

Any notice on replacing the benchmark deposit and lending rates.

What would change our view

A dated PBOC notice making the overnight rate the policy rate would turn this from a plan into a framework change. Months without rules for the tools would support the counter-case.

Sources

Pan Gongsheng, keynote at the 2026 Financial Street Forum annual conference, official text , State Administration of Foreign Exchange, October 19, 2026 (Chinese).

Beijing Daily report on the speech, Beijing municipal government portal , October 20, 2026 (Chinese).

Pan Gongsheng, keynote at the 15th Lujiazui Forum , June 19, 2024, State Administration of Foreign Exchange Shanghai branch (Chinese).

Quotations from Chinese documents are Asymmetric Analytics translations. Plans, reasons and views in this article are the governor's own statements.