The China Interbank Repo Market

Abstract

The market for repurchase agreements (‘repo’) is an important source of short-term funding for financial institutions operating in China. It is used by the People’s Bank of China (PBC) to manage domestic liquidity conditions through its open market operations, and it is likely to become more important over time as a channel for the transmission of monetary policy. This chapter outlines the key features of Chinese repo markets, first focusing on the interbank market, and then discussing recent developments and their impact on the bond market. We highlight that lower and less volatile repo rates over the past couple of