PBOC lowers USD/CNY reference rate to 6.7180 from 6.7195

At 6.7180, Friday’s USD/CNY central rate for the forthcoming trading session has been set by the People’s Bank of China (PBOC), against the previous day’s fixing of 6.7195 and the Reuters estimate of 6.6758.

PBOC FAQs 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 objectives of the People's Bank of China (PBoC). Its remit also includes pursuing financial reforms, such as opening up and developing the financial market.

The PBoC operates under state ownership

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 has a key influence over the bank’s management and direction. Both positions, however, are currently held by Mr Pan Gongsheng.

The PBoC deploys a broad monetary policy toolkit

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), 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 rates for loans and mortgages, as well as the interest paid on savings. Adjusting this rate also enables China’s central bank to influence the exchange rates of the Chinese Renminbi.

Private banks form a small part of China’s financial system

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, the largest are digital lenders WeBank and MYbank, backed by technology giants Tencent and Ant Group. In 2014, domestic lenders funded entirely by private capital were allowed to operate in China’s state-dominated financial sector.

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