PBOC’s USD/CNY reference rate moves up to 6.7180 from 6.7150

For the upcoming trading session, USD/CNY has a higher central rate of 6.7180, set by the People’s Bank of China (PBOC) on Wednesday. This compares with the previous day’s fixing of 6.7150 and the Reuters estimate of 6.6811.

PBOC: Key Questions Answered

What Is the Role of the People's Bank of China?

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

How Is Ownership of the PBoC Structured?

As a state-owned institution of the People's Republic of China (PRC), the PBoC is not regarded as autonomous. Rather than the governor, it is the Chinese Communist Party (CCP) Committee Secretary who exercises key influence over the PBoC’s management and policy direction. The Secretary is nominated by the Chairman of the State Council. At present, however, Mr Pan Gongsheng occupies both positions.

Which Key Instruments Shape PBoC Policy?

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 seven-day Reverse Repo Rate (RRR), the Medium-term Lending Facility (MLF), interventions in the foreign exchange market and the Reserve Requirement Ratio (RRR). China’s benchmark interest rate, however, is the Loan Prime Rate (LPR). When the LPR changes, it directly affects market borrowing costs for loans and mortgages, as well as the interest earned on savings. Adjustments to the LPR also enable China’s central bank to influence the exchange rates of the Chinese Renminbi.

Can Private 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, with backing from technology giants Tencent and Ant Group. It was in 2014 that China permitted domestic lenders funded entirely by private capital to operate within its state-dominated financial sector.

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