PBoC’s Pan Unveils 5 Measures and Plans to Retire Rate Benchmarks Frozen Since 2015

By The Edge Research Team

People’s Bank of China (PBoC) Governor Pan Gongsheng used his keynote to the Financial Street Forum, published on 19 October, to announce 5 measures, to say the bank will study making an overnight rate its main policy rate, and to set out the exit of deposit and lending benchmark rates last changed in October 2015. That old schedule still lists a 1-year lending rate of 4.35 percent, 135 basis points above today’s 1-year loan prime rate (LPR) of 3.0 percent, on our calculation.

5 measures for funds, lenders and offshore clearing banks

The first is a liquidity backstop for large redemptions at non-bank institutions, to be set up with the National Financial Regulatory Administration and the China Securities Regulatory Commission. Pan said it would be switched on in specific scenarios, when asset managers face collective liquidity stress and redemptions and bond sales feed each other. Institutions using it must meet macroprudential requirements and provide high-grade collateral. Eligible users include bank wealth-management subsidiaries, mutual fund managers, and their parent banks and parent securities firms. Operating details will appear in open market operation announcements.

Second, the Standing Lending Facility (SLF), which mainly provides collateralised funding to city commercial banks and rural institutions at overnight, 7-day and 1-month tenors, will be opened to foreign banks incorporated on the mainland, with national banks covered by the same arrangements. After the change it reaches every deposit-taking institution in the country.

Third, the link between the interbank and exchange bond markets is ready and can open once infrastructure operators and participants have finished testing. Fourth, the bank plans a pilot that would let 8 Chinese and foreign offshore renminbi clearing banks trade on their own account in the onshore interbank foreign exchange market. Fifth, a guideline on financing the international science and technology innovation centres of Beijing, Shanghai and the Greater Bay Area was issued on 19 October jointly by the central bank and 10 other government departments, with goals set for 2030 and 2035.

Pan also said the bank plans to bring foreign renminbi clearing banks into the repo facility it set up in June for overseas central banks, monetary authorities, international financial organisations and sovereign wealth funds. Separately, digital renminbi operators have tripled, from 10 to 30, and now cover every systemically important bank.

An overnight rate at the centre

Pan said the interbank overnight repo rate, DR001, has in practice become the target of policy, while the main open market operations and the policy rate still run at 7 days. The bank will study moving its main operations to overnight when the timing suits, and the overnight repo rate in those operations would then become the main policy rate.

China’s policy and lending rates, 19 October 2026

Policy and facility rates from the PBoC; SLF rates in force since 8 May 2025. Gaps in basis points on our calculation.

The central bank lent 80 billion yuan through 7-day reverse repos at 1.40 percent on Monday.

Pan said some lenders, under the bank’s guidance, already price floating-rate loans off DR001 and other market rates by agreement with clients. Financially strong companies could choose DR001 or the LPR, while the LPR can continue as the reference for loans to small businesses and individuals, and DR001 could also be considered as one option for pricing bonds and derivatives. Policy guidance will follow, along with continued reform of the LPR quotation mechanism.

Benchmarks set in 2015 head for retirement

2015 benchmark lending rates against today’s LPR

Benchmark lending rates in force since 24 October 2015; the 1 to 5 year benchmark of 4.75 percent has no LPR counterpart. Gaps on our calculation.

Pan said the benchmark rates have not been adjusted since October 2015 and now serve only as the basis for calculating interest in a few areas of judicial practice, and he set out their exit as part of the reform. For deposits, average rates by maturity have been published since the first quarter of 2026. The 2015 schedule turns 11 years old on Saturday. Against it, the 1-year LPR is 31 percent lower and the over-5-year LPR 29 percent lower, on our calculation.

The renminbi, onshore and offshore

On the currency, Pan said China has “no need or intent” to weaken the renminbi for a trade advantage, that the bank stopped routine intervention in the foreign exchange market after 2017, and that in specific scenarios it uses macroprudential tools, and in extreme ones direct intervention, to correct herd behaviour in the market. He put global turnover in 2025 at close to 10 trillion dollars a day and renminbi turnover at more than 800 billion dollars a day, with around 80 percent of it offshore. On those figures renminbi turnover equals more than 8 percent of the global daily total, on our calculation.

Payments tell a smaller story. Pan said the renminbi takes 3 to 4 percent of international payments on SWIFT data, fifth globally, and between 6 and 7 percent, steadily third, on a broader count he also cited.

Onshore, data for August from the State Administration of Foreign Exchange (SAFE) show the market, excluding trades between 2 foreign currencies, traded 26.28 trillion yuan, equivalent to 3.87 trillion dollars. The interbank segment, where the 8 clearing banks in the planned pilot would trade, took 83.7 percent of it, and derivatives 70.9 percent, on our calculation.

China’s onshore FX market, August 2026

SAFE data; dollar equivalents as published. Interbank and bank to client divide the total one way, spot and derivatives another; the published interbank and bank to client figures sum to 26.29 trillion yuan. Shares of the yuan total on our calculation.

In a companion speech, Deputy Governor Zhu Hexin, who heads the foreign exchange regulator, marked 30 years since China accepted Article VIII of the IMF agreement in 1996. He said current account receipts and payments grew from more than 300 billion dollars that year to more than 8 trillion dollars in 2025, and that companies, banks and other holders accounted for nearly 70 percent of China’s external financial assets at the end of 2025, up from around 30 percent at the end of 2010. By the end of June more than 50,000 companies with good credit records could handle foreign exchange business without prior review, and first-half transactions topped 580 billion dollars, double a year earlier. Zhu said the regulator plans a batch of further measures: a package to ease current account business, a package to improve foreign exchange management of the capital account, and a wider pilot of foreign exchange settlement business at securities firms.

Why it matters: If carried through, the rate reform would change what sets borrowing costs in China. A policy rate set overnight would sit at the same tenor as DR001, the rate Pan said policy already targets in practice, and a DR001 option for financially strong companies would pass rate changes through faster than the LPR, which is quoted once a month. The redemption backstop is aimed at the self-feeding selling that can hit funds and wealth products together, and the high-grade collateral requirement keeps it a liquidity tool rather than a credit one. Bringing foreign banks incorporated on the mainland into the SLF, and a planned pilot letting offshore clearing banks trade in the onshore interbank currency market, would widen access to central bank liquidity and to the onshore market.

Outlook: Operating details for the backstop will come through open market operation announcements, and the bond market link can open once testing is finished. Pan tied the overnight switch to a suitable moment and said guidance on DR001 loan pricing will follow when the timing suits. The next monthly LPR fixing will show whether the 1-year rate stays at 3.0 percent while that reform is prepared.

Sources: People’s Bank of China, State Administration of Foreign Exchange, The Edge.

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