USD/CNY reference rate set at 6.7168 by PBOC, against 6.7156 previously

USD/CNY’s central rate for the upcoming trading session stands at 6.7168, with the People’s Bank of China (PBOC) setting Friday’s fixing above the previous day’s 6.7156.

PBOC: Key Questions Answered

What are the People's Bank of China’s responsibilities?

Maintaining price stability, including exchange rate stability, and supporting economic growth are the principal monetary policy goals of the People's Bank of China (PBoC). Alongside these objectives, China’s central bank seeks to carry out financial reforms, including opening up and developing the financial market.

How is the PBoC owned and directed?

State ownership by the People's Republic of China (PRC) means that the PBoC is not regarded as an autonomous institution. Rather than the governor, it is the Chinese Communist Party (CCP) Committee Secretary who exercises a key influence over the PBoC’s management and direction. The Chairman of the State Council nominates the Committee Secretary. At present, however, Mr. Pan Gongsheng holds both the secretary and governor posts.

Which policy instruments does the PBoC rely on?

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

Can privately owned banks operate in China?

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

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