Open market operation is the main monetary policy tool for the central bank to control the base currency and regulate market liquidity. The central bank conducts securities and foreign exchange transactions with market counterparties to achieve the goal of monetary policy regulation. China's open market operation includes RMB operation and foreign exchange operation. The foreign exchange open market operation 1994 was launched in March, and the RMB open market operation 1998 resumed trading on May 26th, with a gradually expanding scale.

In terms of transaction types, China People's Bank's open market bond transactions mainly include repurchase transactions, spot bond transactions and issuance of central bank bills.

I. Repurchase transaction

Repurchase transactions are divided into positive repurchase and reverse repurchase. Repurchase refers to the behavior that the People's Bank of China sells securities to primary dealers and agrees to repurchase them in the future. The central bank's repurchase operation is to recover liquidity, and the repurchase is to put liquidity when it expires. Reverse repurchase refers to the behavior that the People's Bank of China buys securities from a primary dealer and agrees that the securities will be repurchased by the primary dealer in the future. The central bank's reverse repurchase operation is to put liquidity, and reverse repurchase will recover liquidity at maturity.

Second, cash transactions.

There are two kinds of spot trading: spot buyout and spot selling. The former is that the central bank directly buys bonds from the secondary market and puts in the base currency at one time; The latter is that the central bank directly sells bonds and withdraws the base currency at one time.

Central bank bills are short-term bonds issued by the People's Bank of China. By issuing central bank bills, the central bank can withdraw the base currency and put it back when the central bank bills expire.

Third, open market business.

Open market business: refers to the policy behavior of the central bank to openly buy and sell securities in the financial market in order to regulate the amount of market money. Results: ① Strong initiative and active operation according to policy objectives; (2) high flexibility, which can flexibly control the quantity and direction of buying and selling; (3) mild regulation and small vibration; (4) The influence range is wide. Limitations: ① The central bank must have sufficient financial strength to intervene and control the whole financial market; (2) There must be a well-developed and perfect financial market, which must be nationwide, with complete types of securities and a certain scale; ③ It must be coordinated with other policy tools.