6.7165: PBOC fixes USD/CNY reference rate, compared with 6.7171 previously

6.7165 is Wednesday’s USD/CNY central rate. The People’s Bank of China (PBOC) sets the fixing for the upcoming trading session against the previous day’s 6.7171 and a Reuters estimate of 6.6734.

PBOC: Key Questions Answered

The People's Bank of China’s Policy Mandate

Price stability, including a stable exchange rate, and economic growth are the core monetary policy goals of the People's Bank of China (PBoC). Its remit also includes financial reforms aimed at opening up and developing China’s 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. Rather than the governor, the Chinese Communist Party (CCP) Committee Secretary plays a key role in shaping the bank’s management and direction. The secretary is nominated by the Chairman of the State Council. Both positions, however, are currently held by Mr Pan Gongsheng.

PBoC Policy Tools and Benchmark Rates

To meet its objectives, the PBoC deploys a wider range of monetary policy instruments than those used in Western economies. Its main instruments comprise 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 costs for loans and mortgages, as well as interest paid on savings. The central bank can also use LPR changes to influence Chinese Renminbi exchange rates.

Private Banks in China’s Financial System

China permits private banks and has 19, representing only a small share 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. Domestic lenders funded entirely by private capital were allowed to enter the state-dominated financial sector in 2014.

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