6.7191: PBOC sets USD/CNY reference rate, up from 6.7167 previously

6.7191 is Wednesday’s USD/CNY central rate. The People’s Bank of China (PBOC) sets the fixing for the coming trading session against the previous day’s 6.7167 and the Reuters estimate of 6.6855.

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 main 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 exerts a key influence over the bank’s management and direction. The secretary is nominated by the Chairman of the State Council. Mr Pan Gongsheng, however, currently occupies both posts.

The PBoC’s main monetary policy instruments

To meet its objectives, the PBoC draws on a wider range of monetary policy instruments than its counterparts in Western economies. Its principal tools are the seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and 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

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

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