Managing the curve

Already there are signs the People's Bank of China is trying to manage the yield curve.

Reuters reported last month that it had drained cash from selected banks through repurchase agreements that were not publicly revealed.

It has also provided loans of 263 billion yuan ($42 billion) to China Development Bank to fund housing renovation projects via pledged supplementary lending (PSL) so far this year, and lowered interest rates on PSL to 3.1 percent from 4.5 percent.

Tao Wang, China economist at UBS, says the PSL operation, which was launched in 2014 to influence medium-term lending rates and boost liquidity to specific sectors, could hit 1.5 trillion yuan this year.

The central bank has also said it will expand a pilot program on credit asset pledged relending, a new policy tool that analysts expect to target smaller firms.

But under current circumstances, changing the gradient on the yield curve is an uphill task, said another economist who advises the government.

"As the economy slows, risk appetite tends to rise, which could push up overall borrowing costs. It's not easy to bring down the long-end interest rates and we cannot rely on the central bank alone," he said.