6.7180: PBOC sets USD/CNY reference rate, compared with 6.7150 previously

6.7180 is Wednesday’s USD/CNY central parity rate. The People’s Bank of China (PBOC) set the fixing for the upcoming trading session against the previous day’s 6.7150 and a Reuters estimate of 6.6811.

PBOC: Key Questions Answered

People's Bank of China: Core Responsibilities

Price stability, including exchange rate stability, and economic growth are the principal monetary policy goals of the People's Bank of China (PBoC). Its remit also covers financial reform, including 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, it is the Chinese Communist Party (CCP) Committee Secretary who exercises 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 Tools and Benchmark Rates

A wider range of monetary policy instruments is used by the PBoC to meet its objectives than in Western economies. Key instruments comprise the seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange intervention and Reserve Requirement Ratio (RRR). China’s benchmark interest rate, however, is the Loan Prime Rate (LPR). Adjustments to the LPR feed directly into market rates on loans and mortgages, as well as the interest paid on savings. They also allow China’s central bank to influence Chinese Renminbi exchange rates.

19 Private Banks: China’s Private Banking Sector

Private banks are permitted in China, where 19 such institutions account for only a small share of the financial system. According to The Straits Times, digital lenders WeBank and MYbank are the largest, with backing from technology giants Tencent and Ant Group. China opened its state-dominated financial sector to domestic lenders funded entirely by private capital in 2014.

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