PBOC lowers USD/CNY reference rate to 6.7165 from 6.7171

At 6.7165, Wednesday’s USD/CNY central rate for the forthcoming trading session, set by the People’s Bank of China (PBOC), compares with the previous day’s fixing of 6.7171 and the Reuters estimate of 6.6734.

PBOC: Key Facts Explained

The People's Bank of China Pursues Price Stability and Growth

Safeguarding price stability, including exchange rate stability, and supporting economic growth are the principal monetary policy goals of the People's Bank of China (PBoC). Alongside these objectives, China’s central bank seeks to carry out financial reforms, including opening up and developing the financial market.

State Ownership Shapes the PBoC’s Governance

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, nominated by the Chairman of the State Council, who exerts a key influence over the PBoC’s management and direction. Both positions are currently held by Mr Pan Gongsheng, however.

The PBoC Uses a Broad Range of Monetary Policy Tools

To meet its objectives, the PBoC draws on a wider range of monetary policy instruments than those used in Western economies. Its main tools comprise the seven-day Reverse Repo Rate (RRR), the Medium-term Lending Facility (MLF), intervention in foreign exchange markets 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 the interest paid on savings. The Chinese Renminbi’s exchange rates can also be influenced by the central bank through changes to the LPR.

Private Banks Account for a Small Share of China’s Financial System

With 19 private banks, China permits private banking, although it represents only a small part of the 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. Domestic lenders funded entirely by private capital were permitted to enter the state-dominated financial sector in 2014.

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