China to manage CNH liquidity, PBoC to issue CNY 40bln of 6-month bills in Hong Kong

The People’s Bank of China’s decision to issue 40 billion yuan of 182-day central bank bills in Hong Kong on December 22 should be viewed as part of a broader effort to manage the pace of recent CNY strength.

Unlike earlier episodes where offshore bill issuance was used to counter depreciation pressure, the yuan is currently on a firm footing. The PBoC has been consistently setting the daily USD/CNY fixing higher than market models imply (i.e. weaker for CNY), a clear signal that authorities are seeking to slow the currency’s ascent rather than resist downside risks. Against that backdrop, the Hong Kong bill issuance appears designed to fine-tune offshore liquidity conditions and less so about dampening one-way appreciation dynamics.

The choice of a 182-day tenor is telling. A longer maturity allows the PBoC to lock in conditions through the first half of next year, smoothing funding dynamics across the year-end and early-2026 period.

The bank added liquidity today for 14 days, spanning the period to January 1. I suspect they’ll do more of this in the days ahead:

It reinforces the message that authorities prefer gradual, sustained calibration rather than reactive short-term operations.

Importantly, the move does not signal a shift toward broader monetary tightening. Onshore liquidity is still managed separately through reverse repos and medium-term facilities, and domestic policy remains focused on supporting growth while safeguarding financial stability. The offshore bill programme instead reflects China’s preference for targeted tools that address specific market imbalances.

For markets, the takeaway is that the PBoC is actively managing both sides of currency risk. While it remains unwilling to tolerate disorderly weakness, it is equally cautious about excessive or rapid appreciation that could undermine export competitiveness and financial conditions. The Hong Kong bill issuance, combined with carefully calibrated fixings, underscores a clear policy objective: stability over direction.