Crisis Management for a Conflict with North Korea

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PBOC Trades Gov’t Bonds for Second Straight Month, Adding Net Liquidity of USD7 billion

Yicai Global | English | News | Dec. 5, 2025 | UndeterminedFinancial System Problems

China’s central bank, the People’s Bank of China (PBOC), injected a net CNY50 billion (USD7 billion) into the financial system through government bond trading in November to ease liquidity pressures during the year-end funding squeeze. This amount is up by CNY30 billion from October, marking the second consecutive month of net liquidity addition via bond trading. The PBOC resumed such trading earlier this year after halting it due to supply-demand imbalances and bond market risks.

Analysts view the continued bond purchases as a sign that market conditions have improved enough to support PBOC trading and indicate a persistently supportive monetary stance aimed at stabilizing economic growth through the end of this quarter and into the next. Despite these efforts, the bond market remains relatively weak, so increased government bond purchases serve to reassure market confidence and expectations of loose monetary policy. The amount of bonds bought in November is considered a key indicator of potential policy direction in the near term.

Looking ahead, while monetary policy easing is anticipated this month or in early 2026 based on purchasing managers' index data, the bond market continues to face constraints from new fund sale rules, with 10-year government bond yields expected to trade within a narrow range of 1.75 to 1.85 percent. There may still be funding pressures and short-term spikes in money market rates at year-end despite broadly loose liquidity. Observers suggest that the PBOC’s net treasury purchases may stay steady or increase slightly in response to these conditions.

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