6.7150: PBOC sets USD/CNY reference rate, compared with 6.7146 previously

6.7150 is Tuesday’s USD/CNY central rate. The People’s Bank of China (PBOC) set the fixing for the upcoming trading session against the previous day’s 6.7146 and a Reuters estimate of 6.6489.

PBOC: Key Facts and FAQs

People's Bank of China: Mandate and Responsibilities

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 financial reforms aimed at opening up and developing the financial market.

PBoC Ownership and Leadership

As an institution owned by the state 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 has a key influence over the central bank’s management and direction. The Chairman of the State Council nominates the Committee Secretary. Mr Pan Gongsheng currently occupies both the secretary and governor posts, however.

PBoC Policy Instruments 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 tools comprise 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 the exchange rates of the Chinese Renminbi.

19 Private Banks: A Small Share of China’s Financial System

China permits private banks and has 19 of them, representing only a small proportion of its financial system. According to The Straits Times, digital lenders WeBank and MYbank are the largest, with backing from technology giants Tencent and Ant Group. Domestic lenders funded entirely by private capital were permitted to enter the state-dominated financial sector in 2014.

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