6.774: PBOC fixes USD/CNY reference rate, compared with 6.7191 previously

6.774 is Thursday’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 6.7191 and the Reuters estimate of 6.6797.

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 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

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

The PBoC's main monetary 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 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 rates 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.

19 private banks in China's financial system

Private banking is permitted in China, where 19 private banks account for only a small share of the financial system. According to The Straits Times, the largest are digital lenders WeBank and MYbank, 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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