Impact of 2.48 Trillion Yuan Expiring Funds on A-share Liquidity & Central Bank Hedge Measures

Based on the information provided, I will conduct a detailed analysis of the impact of 1.3236 trillion yuan in reverse repo maturities on A-share market liquidity and funding conditions, as well as the potential hedging measures the central bank may take.

According to Wind data, a large-scale fund maturity is approaching next week:

Date	Maturity Type	Amount (100 million yuan)
Monday	Reverse Repo Maturity	4,823
Tuesday	Reverse Repo Maturity	3,125
Wednesday	Reverse Repo Maturity	5,288
Thursday	Outright Reverse Repo Maturity	11,000
Friday	Treasury Cash Deposit Maturity	600
Total		24,836

Such a large-scale fund withdrawal (close to 2.5 trillion yuan) will have a significant

on market liquidity [1].

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• Huge liquidity gap
  : Approximately 2.48 trillion yuan in fund withdrawals accounts for a significant proportion of the excess reserve scale of the banking system, which will directly impact short-term funding conditions and may lead to an upward trend in key interest rate indicators such as
  DR001, DR007
  .

• Rising funding costs
  : If the central bank does not provide sufficient hedging, interbank market liquidity will converge periodically, and
  SHIBOR rates
  and repo rates may experience volatile increases [2].

• Superimposed cross-month effect
  : After Wednesday (January 6), as we approach the mid-month tax payment and reserve requirement deposit deadlines, if tax-related fund outflows coincide, funding pressure may further intensify.

• Restricted bank-securities transfers
  : Tightening liquidity in the banking system will affect securities firms’ margin financing and securities lending business and bank-securities transfer limits, potentially inhibiting
  incremental funds from entering the market
  .

• Decline in risk appetite
  : Rising funding costs will reduce investors’ risk appetite, potentially leading to
  adjustment pressure on high-valuation sectors
  .

• Increased market volatility
  : Large-scale fund maturities are usually accompanied by market expectations of uncertainty regarding central bank policies, and A-shares may experience
  increased volatility
  .

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The central bank may use

for rolling operations to hedge against maturing funds:

• Daily flexible operations
  : Conduct appropriate reverse repo operations from Monday to Wednesday based on market liquidity conditions to smooth funding fluctuations.
• Tenor matching
  : Use a combination of 7-day and 14-day tenors to balance short-term and medium-to-long-term liquidity needs.
• Scale of injection
  : It is expected that the central bank will inject
  80%-120%
  of hedging funds to ensure reasonable and sufficient market liquidity [3].

• Over-renewal of MLF
  : If next week coincides with the MLF operation window (usually around the 15th of each month), the central bank may over-renew MLF to inject
  medium-term liquidity
  .
• Tools like PSL/CRA
  : Use targeted tools such as Pledged Supplementary Lending (PSL) or Temporary Liquidity Facility (CRA) to support financing in specific areas.

If the central bank judges that the current liquidity environment is tight and economic downward pressure is significant, it does not rule out the possibility of implementing

:

• 0.25 percentage point RRR cut
  : Can release about 500 billion yuan in long-term funds and effectively reduce bank funding costs.
• Targeted RRR cut
  : Implement targeted RRR cuts for areas such as inclusive finance and small and micro enterprises.

• Treasury cash deposit operation
  : The Ministry of Finance and the central bank collaborate to inject funds into the market through treasury cash deposit bidding to hedge against the 60 billion yuan maturing on Friday.

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Based on the operation mode from 2024 to 2025:

1. Liquidity hedging ratio
   : The central bank’s average hedging ratio for large-scale reverse repo maturities is about
   90%-110%
   , and in most cases, it maintains a
   neutral to loose
   funding environment [4].

2. Policy continuity
   : In 2025, the central bank continued its
   prudent and neutral
   monetary policy stance, emphasizing “no flood-like stimulus” and focusing on targeted support.

3. Price-based tools
   : The central bank cut interest rates only once (10 basis points) in 2025, indicating a policy preference for
   quantity-based tools
   over price-based ones [5].

---

• Monitor funding rates
  : Pay close attention to indicators such as DR007 and SHIBOR; if rates rise rapidly, it is recommended to moderately control positions.

• Allocate to defensive sectors
  : During periods of tight funding conditions,
  banking, utilities, and high-dividend
  sectors tend to perform relatively stably.

• Avoid excessive leverage
  : Margin traders should be alert to rising financing costs and avoid over-leveraged operations.

According to President Xi Jinping’s statement at the end of 2025, China will implement

in 2026 [6], which means:

• Monetary policy will remain accommodative
  : The central bank has sufficient room to support the real economy through tools such as RRR cuts and interest rate cuts.
• Fiscal policy will work in coordination
  : In 2026, 29.5 billion yuan in central budgetary investment is planned, and special treasury bonds will be issued to support consumption [7].
• Overall friendly liquidity environment
  : Despite short-term fluctuations, the annual liquidity environment is expected to remain
  reasonably sufficient
  .

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Impact Dimension	Assessment
Funding Maturity Pressure	High (2.48 trillion yuan, a historically high level for a single week)
Central Bank Hedging Will	Strong (clear policy orientation to maintain reasonable and sufficient liquidity)
Short-term Impact on A-shares	Neutral to Negative (periodic convergence of funding conditions)
Medium-term Impact on A-shares	Neutral to Positive (policy support remains)
Central Bank Tool Selection	Reverse repo renewal as main, MLF/RRR cut as supplementary

: Next week’s 1.3236 trillion yuan reverse repo maturities (total fund withdrawal of about 2.48 trillion yuan) will cause short-term disturbances to market liquidity, but the central bank will most likely provide sufficient hedging through methods such as over-renewing reverse repos. A-share investors need to be alert to funding fluctuations at the beginning of the week, but there is no need for excessive panic as the central bank has strong willingness and ability to maintain liquidity stability.

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[0] Jinling API Data
[1] Reuters - “China’s Central Bank Open Market Operations and Liquidity Management”
[2] Bloomberg - “Analysis of Interbank Market Interest Rate Trends in China”
[3] Xinhua News Agency - “The Central Bank Will Continue to Implement a Prudent Monetary Policy”
[4] Wind Data - “Historical Statistics of Central Bank Open Market Operations”
[5] Bloomberg - “PBOC’s Stingiest Year for Easing Since 2021”
[6] Reuters - “China’s Xi promises more proactive macro policies in 2026”
[7] WSJ - “China’s factory activity signals return to growth”