Last weekend, the Central Bank of China pumped 600 billion yuan (about 86.4 billion USD) through 14-day repurchase contracts, ending a 2-month hiatus with this activity.
Industrial Securities Securities Company forecasts that the People's Bank of China may add up to 3,500 billion yuan (504 billion USD) in liquidity using similar tools before the Lunar New Year holiday begins from February 15.
According to Bloomberg calculations, the amount of money pumped to compensate for the liquidity gap is about 3,200 billion yuan (461 billion USD). The demand for holiday spending, large government bond issuances, and strong demand from businesses for the yuan are all forecast to pull money out of the banking system.
For the People's Bank of China, keeping the financial "blood" running smoothly is a key factor to avoid seasonal cash shortages and maintain economic growth momentum amid increasing pressure. Before the latest move, the Central Bank of China doubled its bond purchases in January and injected a record 1 trillion yuan (USD 144 billion) of medium and long-term capital into the banking system.
The Central Bank has enough room to rotate liquidity" - Mr. Ming Ming, chief economist at Citic Securities, said.
According to him, the People's Bank of China can compensate for the inherent gap by combining traditional money pumping tools with stable bond buying scale, thereby maintaining stable liquidity conditions in the bond market.
Part of the liquidity pressure that the People's Bank of China has to deal with comes from household spending behavior. Experts from Huaxi Securities forecast that about 900 billion yuan (130 billion USD) may be withdrawn from the banking system in China due to travel demand and the tradition of giving lucky money in cash during the Lunar New Year.
In addition, according to Bloomberg's calculations, about 405.5 billion yuan (58 billion USD) of the Chinese People's Bank's reversed acquisition contract will mature this week, continuing to withdraw money from the banking system. Another similar maturity will also attract an additional 500 billion yuan (72 billion USD).
According to Guolian Minsheng Securities, China is accelerating the issuance of government bonds before the holidays. This could exacerbate the illiquidity situation.
Bloomberg data shows that Chinese officials expect to issue about 950 billion yuan (137 billion USD) in bonds in the first 2 weeks of February 2026, about 18% higher than the total issuance of the whole month of January. This figure does not include 412 billion yuan (59 billion USD) in bonds from the central government.
Export businesses converting USD revenue into yuan also contribute to tightening liquidity, according to Sinolink Securities. This demand appeared after the yuan rose about 2.6% since the end of October 2025, thanks to inflows, weak USD and the People's Bank of China's acceptance of the appreciation of the domestic currency.
