Key Points
- Resumption likely before year‑end 2025: Market expectations and recent joint working‑group meetings increase the probability that PBOC government bond operations will restart in Q4 2025.
- Stronger fiscal‑monetary coordination: A joint working group between the Ministry of Finance (Caizhengbu 财政部) and the People’s Bank of China (Zhongguo Renmin Yinhang 中国人民银行) is aligning issuance, liquidity and market‑stability measures.
- Notable liquidity support — large net purchases: The PBOC conducted net bond purchases of 10,000亿元 (total = ¥1,000,000,000,000 RMB / $137.93 billion USD) from Aug–Dec 2024 to keep liquidity ample.
- Policy toolkit to stabilize markets: Authorities are prepared to use bond buy‑sell operations, RRR cuts, MLF rollovers and reverse‑repo actions to manage yields, encourage credit supply and support domestic demand.
- Expected Resumption Timeline: Before year-end 2025 (Q4 2025)
- Contributing Factors: Market expectations, recent joint working group meetings (Ministry of Finance & PBOC)
- Current Status: Suspended since January 2025; resumption anticipated when market supply-and-demand conditions permit.
- Potential Impact: Increased market liquidity, stabilized financial markets, supported economic recovery.
PBOC government bond operations are back in market conversations as fiscal and monetary coordination tightens in China.
Quick Snapshot — What Investors and Founders Need to Know
- PBOC government bond operations may resume before year‑end 2025, according to market expectations and recent joint working group meetings.
- Fiscal‑monetary coordination is intensifying via a joint working group between the Ministry of Finance (Caizhengbu 财政部, pinyin: Caizhengbu) and the People’s Bank of China (Zhongguo Renmin Yinhang 中国人民银行, pinyin: Zhongguo Renmin Yinhang).
- Net bond purchases from Aug–Dec 2024 totaled 10,000亿元 = ¥1,000,000,000,000 RMB ($137.93 billion USD), helping keep liquidity ample.
- Key tools on the table: bond buy‑sell operations, RRR cuts, MLF rollovers, and reverse‑repo operations to stabilize yields and encourage credit supply.
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Markets Expect the PBOC to Resume Government Bond Operations Before Year‑End
Since the People’s Bank of China (Zhongguo Renmin Yinhang 中国人民银行, pinyin: Zhongguo Renmin Yinhang) suspended open‑market government bond purchase operations in January of this year, market expectations for a restart have been steadily rising.
A joint working group made up of the Ministry of Finance (Caizhengbu 财政部, pinyin: Caizhengbu) and the People’s Bank of China recently held its second leaders’ meeting to discuss topics including government bond issuance management and the central bank’s government bond trading operations.
Experts say these developments increase the likelihood that the central bank will resume government bond buy‑sell operations before the end of 2025.
Stronger coordination between fiscal and monetary policy would help keep market liquidity ample, stabilize financial markets, and support an improved economic recovery.
Policy Coordination Has Yielded Positive Results
Since the Ministry of Finance and the PBOC set up the joint working group last year, fiscal and monetary policy coordination has intensified.
Central bank government bond operations are an important instrument in that coordination.
To reinforce counter‑cyclical monetary policy and keep banking system liquidity ample, the PBOC carried out large net bond purchases from August through December 2024.
Monthly net purchases of government bonds were: 1,000亿元, 2,000亿元, 2,000亿元, 2,000亿元 and 3,000亿元 respectively, totaling 10,000亿元.
(Using an exchange rate of 1 USD = ¥7.25 for conversion purposes: 1,000亿元 = ¥100,000,000,000 RMB ($13.79 billion USD); 2,000亿元 = ¥200,000,000,000 RMB ($27.59 billion USD); 3,000亿元 = ¥300,000,000,000 RMB ($41.38 billion USD); total 10,000亿元 = ¥1,000,000,000,000 RMB ($137.93 billion USD).)
At the first formal meeting of the joint working group in October 2024, both sides agreed that central bank government bond trading is an important tool to expand the monetary policy toolkit and improve liquidity management.
The PBOC has said these operations are aimed at base‑money supply and liquidity management: they can include both purchases and sales and are intended to be used flexibly alongside other tools to improve short‑, medium‑ and long‑term liquidity management.
Zhang Xu (Zhang Xu 张旭), chief fixed‑income analyst at China Everbright Securities (Guangda Zhengquan 光大证券, pinyin: Guangda Zhengquan), said the central bank’s government bond trading reflects a stronger counter‑cyclical monetary policy stance focused on expanding domestic demand, boosting confidence, and supporting a sustained recovery.
Coordination also shows up in the PBOC’s broader toolkit and actions to support government bond issuance.
This year the government bond issuance scale expanded and issuance rhythm accelerated, with most months near peak issuance.
In response, the PBOC moved timely to cut interest rates and reserve requirement ratios where appropriate, and it continued to roll over and expand medium‑term lending facilities (MLF) and outright reverse‑repo operations to keep market liquidity ample—creating a favorable monetary and financial environment for government bond issuance, said Wang Qing (Wang Qing 王青, pinyin: Wang Qing), chief macro analyst at Orient Jincheng (Dongfang Jincheng 东方金诚, pinyin: Dongfang Jincheng).
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Market Conditions Are Becoming Conducive to a Restart
With the central bank’s bond operations discussed in detail at the joint working group’s second leaders’ meeting, market expectations for a resumption before year‑end have grown.
The PBOC previously announced it would suspend open‑market bond purchase operations starting January 2025 and would resume as market supply‑and‑demand conditions permit; the suspension had been explained by “persistent recent demand outstripping supply” in the government bond market.
From current bond market dynamics, Wang Qing notes that 10‑year government bond yields have recently risen to around 1.8%, term spreads have widened, and forthcoming growth‑stabilizing measures are expected to have modest force.
Against that backdrop, the central bank could resume government bond trading in the fourth quarter of 2025 while combining that with a reserve requirement ratio (RRR) cut to inject longer‑term liquidity into the banking system.
That approach would help stabilize the domestic bond market, encourage financial institutions to increase credit supply toward year‑end, and strengthen counter‑cyclical support to meet annual economic and social development targets.
“The same net purchase amount from the central bank will have different effects on yields depending on market conditions,” Zhang Xu explained.
For example, in December of last year the bond market was in a stronger bullish phase, so relatively small central bank net purchases had a larger effect on rates.
By contrast, at the end of August this year the 10‑year yield had risen roughly 20 basis points compared with the end of June; in that market context, central bank purchases would exercise less downward pressure on yields than they did last December.
Nonetheless, Zhang believes the current timing is reasonably favorable for restarting bond trading.
He also expects that government bond supply could increase further over the coming years; in that case, central bank buy‑sell operations would be useful for liquidity management, and the PBOC will need to coordinate more closely with the Ministry of Finance on issuance scale, structure and timing to create an appropriate issuance environment.
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Multi‑Party Coordination to Amplify Policy Effects
Experts say fiscal and monetary policy are likely to push in the same direction in the period ahead, maximizing synergy.
This coordinated stance is an important lever for authorities to stabilize macroeconomic conditions and continue preventing and resolving risks in key areas.
At the second leaders’ meeting the joint working group discussed financial market functioning, government bond issuance management, and improving mechanisms for issuing offshore renminbi government bonds.
Compared with the first meeting last year, the second meeting covered a wider range of coordination topics, which market participants say strengthens the policy response toolkit for a complex and evolving market environment.
Ming Ming (Ming Ming 明明, pinyin: Ming Ming), chief economist at CITIC Securities (Zhongxin Zhengquan 中信证券, pinyin: Zhongxin Zhengquan; English: CITIC Securities), noted the broader agenda at the second meeting helps safeguard a continued economic rebound.
Sun Binbin (Sun Binbin 孙彬彬, pinyin: Sun Binbin), chief economist at Caitong Securities (Caitong Zhengquan 财通证券, pinyin: Caitong Zhengquan), said the subsequent bond issuance structure and rhythm may be further optimized and that the PBOC’s liquidity injections will likely be timed more closely to issuance schedules to preserve bond market stability.
“Better coordination between fiscal and monetary policy helps stabilize growth and boost domestic demand,” Ming Ming added.
“Expect more proactive coordination on keeping market liquidity ample, stabilizing financial markets, resuming central bank government bond trading and developing offshore renminbi government bond issuance.”
Actionable Takeaways for Investors, Founders, and Marketers
- Fixed‑income investors: Watch the PBOC/Ministry of Finance joint meeting cadence and issuance calendar for windows when central bank buy‑sell operations could reduce volatility.
- Bank lenders & fintechs: A coordinated RRR cut and resumed bond operations can ease funding costs and nudge banks to expand credit supply.
- Startups & corporates: Expect a more supportive liquidity backdrop into year‑end—good time to reassess capital plans, refinancing, and growth spending.
- Marketers in finance: Create content on liquidity management, offshore renminbi bonds, and bond yield dynamics to capture search interest.
How This Changes the Macro Playbook
- Counter‑cyclical policy is back in focus — but it will be more surgical: bond trading + RRR + MLF combinations rather than blunt large‑scale interventions.
- Issuance rhythm matters: Closer timing between PBoC liquidity moves and Ministry of Finance issuance can dampen term spread volatility.
- Offshore RMB bonds: Improving mechanisms for offshore issuance signals a longer‑term push to internationalize funding channels and diversify demand.
Note on Currency Conversions
All RMB→USD conversions in this article use an illustrative exchange rate of 1 USD = ¥7.25 (approx.).
Conversions are rounded to two decimal places for clarity.
References
- Steady Growth, Expanding Domestic Demand: Fiscal and Monetary Policy Coordination Will Continue to Strengthen – China Securities Journal
- Steady Growth, Expanding Domestic Demand: Fiscal and Monetary Policy Coordination Will Continue to Strengthen – Eastmoney
- People’s Bank of China – People’s Bank of China
PBOC government bond operations remain a key theme to track for portfolios and policy bets heading into year‑end 2025.
