While propping up the market, did it "siphon off" 350.5 billion yuan? The misreading triggered by the central bank's net liquidity withdrawal: Understand the breathing rhythm of open market operations

On July 22, two pieces of news emerged on the same day, seemingly pointing in opposite directions.

One came from the market: market-stabilizing funds continued to enter the market. Previously, China Reform Holdings Corporation Limited disclosed on July 19 that its relevant entities had used over 500 billion yuan in special re-loans for share repurchases and increases, along with supporting funds, to maintain market stability (Source: China Reform Holdings Corporation Limited, July 19, 2026). The other came from the central bank: on July 22, the central bank launched a 76-billion-yuan 7-day reverse repo operation via fixed-rate, quantity-based bidding, with an operating rate of 1.4%; as 426.5 billion yuan in reverse repos matured that day, the net single-day liquidity withdrawal amounted to 350.5 billion yuan (Source: Announcement of the People's Bank of China, National Business Daily, Wind Data, July 22, 2026).

As a result, many people drew a conclusion: while shouting about stabilizing the market, the central bank is quietly "draining liquidity" — is the central bank being duplicitous?

This is a typical misinterpretation. Both events are real, but they do not refer to the same thing.

Reverse repos are funds renewed on a daily basis

To resolve this misunderstanding, we must first clarify what reverse repos actually are.

A reverse repo is a tool for the central bank to provide short-term funds to commercial banks: banks pledge their bonds to the central bank, the central bank lends money to the banks, with an agreed term (commonly 7 days), and upon maturity, the banks repay the principal and redeem their bonds. Its essence is a short-term loan with a fixed term, much like a shared power bank that can be renewed on a daily basis: the borrowed power must eventually be returned, and returning it upon maturity does not mean the landlord is evicting the tenant.

Walking through the numbers in detail makes this more intuitive. Suppose the liquidity is tight on a certain trading day, and the central bank injects 426.5 billion yuan via 7-day reverse repos that day; seven days later, when the contracts mature, the banks return the 426.5 billion yuan plus interest to the central bank as agreed. On the maturity day, even if the central bank injects another 76 billion yuan in new funds, the bookkeeping net result is still a "net liquidity withdrawal of 350.5 billion yuan". Throughout this process, the central bank has not taken any active "draining" action — it is merely recovering the money it lent out seven days prior. The more funds injected the previous week, the more striking the maturity figure this week, that is all.

With this understanding, the "net withdrawal of 350.5 billion yuan" is no longer alarming. The 426.5 billion yuan maturing on July 22 is money lent out on a previous trading day, with contracts explicitly stating repayment is due on this date; on the same day, the central bank lends out another 76 billion yuan. Maturity repayment is the natural fulfillment of contracts, not an active move by the central bank to siphon off funds. After netting out the inflows and outflows, the books show a "net withdrawal of 350.5 billion yuan", but this is more like the daily ebb and flow of tides, rather than a reservoir opening its gates to release water or closing them to store it.

A counterintuitive fact is that the size of the maturity volume depends on how much was injected a week earlier. When market volatility intensified in the early period, the central bank often increased reverse repo injections to support liquidity; these funds matured collectively after 7 days, creating the impression of a "huge liquidity withdrawal" on the books. In other words, the large-scale maturity on July 22 is precisely the residual effect of the earlier intensified supportive efforts.

Key Data: On July 22, the central bank launched 76 billion yuan in 7-day reverse repos with an operating rate of 1.4%, fully meeting the demand of primary dealers; 426.5 billion yuan matured that day, resulting in a single-day net liquidity withdrawal of 350.5 billion yuan (Source: Announcement of the People's Bank of China, National Business Daily, Wind Data, July 22, 2026).

Single-day readings carry no signal value

The second layer of misunderstanding lies in the way of interpretation: judging the tightness of monetary policy based on a single day's "net injection/net withdrawal" is essentially using the wrong dashboard.

Open market operations are a daily tool for liquidity management, designed to counter short-term disruptions such as tax periods, government bond payments, and month-end/quarter-end assessments, with the goal of keeping the banking system's liquidity operating neither too tight nor too loose, closely aligned with the policy rate. Since they are meant to address short-term disruptions, operation volumes naturally fluctuate daily: more injections today, fewer tomorrow, and net withdrawals the day after are all technical responses to the day's supply and demand for funds. Looking for policy signals in single-day readings is like judging climate change based on today's rainfall, where noise far outweighs useful information.

What is truly worth observing? Focus on interest rates, not quantities. The operating rate for the July 22 reverse repo remains at 1.4%, consistent with previous levels; the 7-day reverse repo rate, which serves as the basis for pricing the Loan Prime Rate (LPR), has remained unchanged for 14 consecutive months since its cut in May 2025, and the July LPR quotations accordingly stayed at 3.0% for the 1-year tenor and 3.5% for the over-5-year tenor (Source: People's Bank of China, People's Daily Online, National Business Daily, July 20, 2026). The unchanged price indicates that the tone of monetary policy has not shifted; the fluctuations in quantity are just routine breathing within this consistent tone.

To prioritize the dashboard metrics: when judging monetary easing or tightening, first check if the policy rate has changed, second check if the deposit reserve ratio has been adjusted, third look at the volume and price of medium-term tools such as the Medium-term Lending Facility (MLF), and finally refer to the cross-week trend of open market operations. Single-day net injections or withdrawals can essentially be crossed off the observation list.

Takeaway Framework · Central Bank Actions Four-Tier Dashboard: First check the policy rate (steering wheel), second check the reserve requirement ratio (flood gate), third check the volume and price of medium-term tools like the MLF (relay station), fourth check the cross-week trend of open market operations (daily breathing). In short, price matters more than quantity, and trend matters more than a single day's reading.

The following is a line of reasoning for readers' reference. During the period when market-stabilizing funds are entering the market alongside sharp market volatility, open market operations are likely to continue high-frequency fine-tuning that "responds dynamically to demand": increasing injections when liquidity is tight, and reducing them when liquidity is loose, meaning single-day reading fluctuations may be larger than usual. If a policy rate cut or reserve requirement ratio cut occurs later, that will be the substantive signal of a shift in the monetary environment; before that, the repeated appearance of the "net withdrawal" label is mostly a technical echo of the successive maturities of large-scale supportive funds from earlier periods. The above is a logical deduction and does not constitute a judgment on policy direction.

What does this have to do with you

First, for investors holding stocks and funds: distinguishing between "technical withdrawal" and "policy tightening" can prevent you from making emotional decisions scared off by headlines. The 350.5 billion yuan on July 22 falls into the former category, meaning money in the market has not been "siphoned off".

Second, for households concerned about mortgage and deposit rates: single-day fluctuations in open market operations have no bearing on your monthly mortgage payments. What truly affects mortgage rates are the 7-day reverse repo rate and the LPR, both of which remained unchanged in July, and any changes will be announced via official, clear public notices.

Third, for everyone reading financial news: this is a general lesson in media literacy. Many sensational financial headlines stem from mistaking routine operational technical details for directional signals. Learning to distinguish between the "dashboard" and the "noise meter" is more useful than reading ten extra news flashes.

The central bank's open market operations take place every trading day, just like breathing happens every second. No one would conclude a person is deflating just because they exhale once, and we should exercise the same patience when reading the central bank's accounts. What do you think about this? Feel free to share your views in the comment section.

This article is for information sharing and industry analysis only, and does not constitute any investment advice, investment analysis opinion, or transaction solicitation. The data in the article comes from public sources such as the Announcement of the People's Bank of China (July 22, 2026), National Business Daily (July 20 and 22, 2026), People's Daily Online (July 20, 2026), China Reform Holdings Corporation Limited (July 19, 2026), and Wind Data. All data is subject to the original source. Markets carry risks, and decisions require caution. Content marked "reasoning" in the article is logical deduction based on public information and does not represent official positions.

This article is from the WeChat Official Account "BT Finance" (ID: btcjv1), authored by BT Finance, and published with authorization from 36Kr.