The source code of China's base money. The asset side records three eras of Chinese monetary policy: FX-purchase dominance (base money created through forced FX settlement), lending-facility dominance (MLF/PSL claims on depository institutions), and — since outright government bond trading restarted in 2024 — a renewed expansion of claims on the central government. On the liability side, reserve money and government deposits set the day-to-day tightness of interbank liquidity.
The PBOC balance sheet shows the composition of the central bank's assets and liabilities. Key asset items include foreign exchange reserves (外汇占款), claims on government, and claims on other depository institutions (reflecting MLF, PSL, and other lending facilities). Key liability items include reserve money (储备货币), currency in circulation, and government deposits.
Why it matters: Changes in the balance sheet reveal how base money is being created or withdrawn. The structural shift from FX-driven base money creation to policy-tool-driven creation (claims on depository institutions) is a major theme. Rising government deposits can temporarily tighten liquidity even without policy action — bond-issuance settlements and tax deadlines hit interbank funding through exactly this line, the same mechanism as the U.S. TGA. Since the PBOC restarted outright government bond trading in August 2024, "claims on central government" has become the window on this new injection channel; and comparing changes in "claims on other depository institutions" against the MLF/PSL maturity schedule reveals whether the PBOC is rolling, adding, or quietly draining.