PBOC and Finance Ministry Join Forces to Add Bond Trading to Monetary Policy Toolbox

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The People’s Bank of China

China’s central bank and the Ministry of Finance have set up a joint working group to strengthen cooperation in government bond trading operations, with the aim of enriching the central bank’s monetary policy toolbox and maintaining liquidity stability.

The move follows directives from the third plenary session of the 18th Central Committee of the Communist Party in July and the Central Financial Work Conference in October 2023, which emphasized the need to diversify the tools available for monetary policy and to increase government bond trading in the central bank’s open-market operations.

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China's central bank and Ministry of Finance have formed a joint group to enhance liquidity stability through government bond trading, aligning monetary and fiscal policies for economic stability.
The PBOC resumed limited bond trading operations in 2023 after previously halted activities; its bond holdings remain just over 2% of total government bonds.
China's government bond market, third largest globally, offers opportunities for PBOC’s open-market operations, with recent purchases totaling 300 billion yuan to stabilize the bond market.

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