6.7156: PBOC fixes USD/CNY reference rate, compared with 6.7180 previously

6.7156 is the USD/CNY central rate set for Thursday’s trading session by the People’s Bank of China (PBOC). This compares with the previous day’s fixing of 6.7180 and the Reuters estimate of 6.6783.

PBOC: Key Questions Answered

The People's Bank of China’s policy mandate

Safeguarding price stability, including exchange rate stability, and supporting economic growth are the core monetary policy goals of the People's Bank of China (PBoC). Its remit also includes pursuing financial reforms, such as opening up and developing the financial market.

PBoC ownership and leadership

State ownership by the People's Republic of China (PRC) means the PBoC is not regarded as an autonomous institution. Key influence over its management and direction rests with the Chinese Communist Party (CCP) Committee Secretary rather than the governor. The Secretary is nominated by the Chairman of the State Council. Both positions, however, are currently held by Mr Pan Gongsheng.

The PBoC’s main policy instruments

To meet its objectives, the PBoC deploys a wider range of monetary policy instruments than those used in Western economies. Its principal tools are a seven-day Reverse Repo Rate (RRR), the Medium-term Lending Facility (MLF), foreign exchange interventions and the Reserve Requirement Ratio (RRR). China’s benchmark interest rate, however, is the Loan Prime Rate (LPR). Adjustments to the LPR directly affect market borrowing rates for loans and mortgages, as well as interest paid on savings. The central bank can also influence Chinese Renminbi exchange rates through changes to the LPR.

Private banks in China’s financial system

Private banks are permitted in China, where 19 operate and account for only a small share of the financial system. According to The Straits Times, digital lenders WeBank and MYbank are the largest, backed by technology giants Tencent and Ant Group. China opened its state-dominated financial sector to domestic lenders funded entirely by private capital in 2014.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights