(Yicai) Oct. 20 -- China's central bank is considering shifting its main open market operations from seven-day to overnight maturities, a move that analysts say would improve the precision of monetary policy regulation rather than signal an interest rate cut.

Pan Gongsheng, governor of the People's Bank of China, said at the opening ceremony of the 2026 Financial Street Forum's annual conference yesterday that the central bank will study the possibility of switching the maturity of its main open market operations to overnight at an appropriate time, making the overnight repo rate its main policy rate.

The proposed change would bring the PBOC's policy tools more closely in line with the interest rate it seeks to control. The central bank now focuses on the rate banks charge each other for overnight borrowing, known as DR001, but its main operations and policy rate are still based on seven-day borrowing. Switching to overnight operations would close this gap, helping the PBOC guide market rates more effectively and bringing its approach closer to that of major central banks such as the US Federal Reserve and the European Central Bank.

The suggested adjustment is a reform of the monetary policy framework rather than a conventional interest rate cut or hike, market experts told Yicai. The focus is on improving how the central bank guides interest rates, they added.

As overnight operations become more routine, the main policy rate could shift from seven days to overnight, but this should not be equated with an interest rate cut, said Wang Jian, chief financial analyst at Guosen Securities' economic research institute.

Guo Lei, chief economist at GF Securities, also said the PBOC is continuously refining its monetary policy framework through a series of consistent institutional reforms aimed at transitioning toward a price-based approach. Market participants should avoid interpreting or speculating on such operational reforms as interest rate cuts, he added.

Improving Policy Precision

Switching both the main open market operations and the policy rate to overnight maturities would bring two key benefits, according to Guo.

First, it would enable more precise liquidity management and strengthen the central bank's control over market interest rates. Second, it would align the maturities of market and policy rates, helping to smooth the transmission of monetary policy.

Zhang Xu, chief fixed-income analyst at Everbright Securities, also said the key significance of shifting the main policy rate and open market operations from seven-day to overnight maturities lies in the substantial improvement in regulatory precision.

The PBOC may eventually develop a framework centered on overnight market interest rates, relying primarily on regular overnight operations alongside instruments with different maturities, experts said. Such an approach would be broadly similar to the monetary policy frameworks used by central banks in developed economies, they added.

Editor: Emmi Laine