China’s central bank is changing how it issues its one-year medium-term lending facility (MLF) loans, adopting a bidding system that will let market forces determine interest rates. The People’s Bank of China (PBOC) will offer 450 billion yuan in MLF loans this week, using a fixed-quantity, multiple-price bidding method.

Analysts say the move signals a further shift away from using the MLF rate as a key policy guide, as the central bank increasingly relies on the seven-day reverse repo rate. The PBOC said the change aims to better manage liquidity and meet varied funding needs across banks.

This month’s operation, with 387 billion yuan in MLF loans set to expire, will inject a net 63 billion yuan into the market. The PBOC also reiterated plans to cut reserve requirements and interest rates when conditions allow.

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MLF is coming up today