6.7152: PBOC fixes USD/CNY reference rate versus 6.7174 previously

6.7152 is Friday’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 6.7174 and the Reuters estimate of 6.6756.

PBOC: Key Questions Answered

The People's Bank of China’s Mandate

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). Its remit also includes pursuing financial reforms, notably opening up and developing the 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 exercises key influence over its management and direction. The Secretary is nominated by the Chairman of the State Council. Mr. Pan Gongsheng currently holds both the Secretary and governor posts, however.

The PBoC’s Core Policy Instruments

To meet its objectives, the PBoC deploys a wider range of monetary policy instruments than those used in Western economies. Its main tools 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

Private banks are permitted in China, with 19 operating in the country, 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. China opened its state-dominated financial sector to domestic lenders funded entirely by private capital in 2014.

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