The central bank injects medium-term liquidity into the banking system through repurchase agreements, which helps maintain a relatively stable and sufficient liquidity in the money market.

On November 4th, the People's Bank of China announced that in order to maintain ample liquidity in the banking system, on November 5th, the People's Bank of China will conduct 700 billion yuan of fixed-rate, multi-price bidding, and multiple-winner reverse repurchase operations with a term of 3 months. Wang Qing, Chief Macro Analyst at Orient Securities, stated that the main reasons behind this move are as follows: first, in October, there was a 500 billion yuan limit set for local government debt to be used for debt restructuring and expanding effective investment, which means that an additional 500 billion yuan of local government bonds may be issued before the end of the year, potentially resulting in a high level of government bond issuance in November. Second, after the completion of the 500 billion yuan injection of new policy financial instruments in October, there will be a rapid growth in accompanying loans. Third, there will be a significant increase in the maturity of interbank certificates of deposit in November. All of these factors may lead to a tightening of liquidity. Therefore, in order to address the potential tightening of liquidity, the central bank is injecting medium-term liquidity into the banking system through reverse repurchase agreements, which will help maintain a stable and ample liquidity environment. This move will support government bond issuance, guide financial institutions to increase their monetary and credit lending efforts, and signal a continuation of supportive monetary policies.