National Business Daily:

In October 2025, the PBC announced that it would resume open-market treasury bond trading operations. Will there be an increase in treasury bond trading in 2026? Under what circumstances will the scale of such operations be increased? Thank you.

Zou Lan:

Thank you for your questions. Let me answer these questions. The central financial work conference called for enriching the monetary policy toolbox and gradually increasing treasury bond trading in the central bank's open-market operations. Open-market operations are an important means for the central bank to implement monetary policy regulation and liquidity management, including repos of various maturities, medium-term lending facilities, treasury bond trading, and other tools. Among these, outright repos are mainly carried out through buying and selling treasury bonds. To ensure ample market liquidity and stable short-term interest rates, in 2025, various open-market operations cumulatively injected a net 6 trillion yuan, including a net injection of 3.8 trillion yuan made through outright repos as well as a net purchase in treasury bonds of 120 billion yuan. At the same time, the PBC is also advancing reform measures. With the continuous enrichment of the monetary policy toolbox, it can better use various tools according to needs and market conditions, improve the mechanism for base money injection and pricing of operation tools, and strengthen information disclosure of monetary policy operations to enhance policy transparency.

Treasury bond trading operations also helps strengthen the coordination between monetary policy and fiscal policy. In recent years, China has implemented a proactive fiscal policy, with an increase in government bond issuance. In 2025, 16 trillion yuan of treasury bonds were issued, with a net increase of 6.6 trillion yuan for the year, and a year-end balance of about 40 trillion yuan. Of this, banks, non-bank financial institutions, and overseas institutions held 27 trillion yuan, 5 trillion yuan, and 2 trillion yuan respectively. Banks and other institutions in the market are the main holders of treasury bonds in order to improve asset allocation and strengthen liquidity management. On the premise of meeting the needs of these institutions for the allocation of treasury bond assets, the PBC can better ensure the smooth issuance of treasury bonds at a reasonable cost through buying and selling these bonds. In addition, in 2025, the balance of treasury bonds and local government bonds purchased by the PBC through outright repo operations was close to 7 trillion yuan, which has also played an important role in improving the market liquidity of government bonds.

Buying and selling of treasury bonds is also conducive to giving full play to the role of the treasury bond yield curve as a pricing benchmark, enriching macro-prudential management tools, and preventing the risk of sharp market fluctuations. At the beginning of 2025, the supply shortage in the bond market was relatively prominent and market risks had amounted to some extent, so we suspended bond purchases to avoid competing with the market for bonds; in the second half of the year, as market supply and demand reached balance, we resumed operations in the fourth quarter to ensure the smooth operation of the bond market.

Next, the PBC will consider factors such as the need for base money injection, the supply and demand in the bond market, and changes in the yield curve. It will also carry out treasury bond buying and selling operations, together with other liquidity tools, to maintain ample liquidity and create a conducive monetary and financial environment for the smooth issuance of government bonds. Thank you.