PBOC raises USD/CNY reference rate to 6.7171 from 6.7162

USD/CNY has been given a higher central rate for Tuesday’s upcoming trading session, with the People’s Bank of China (PBOC) setting the fixing at 6.7171. This compares with the previous day’s fixing of 6.7162 and the Reuters estimate of 6.6731.

PBOC: Key Questions Answered

What is the People's Bank of China’s role?

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). The central bank also seeks to carry out financial reforms, including opening up and developing China’s financial market.

How is the PBoC owned and managed?

State ownership by the People's Republic of China (PRC) means that 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 on the central bank’s management and direction. The Secretary is nominated by the Chairman of the State Council. At present, however, Mr Pan Gongsheng holds both posts.

Which key instruments does the PBoC use to implement policy?

To meet its objectives, the PBoC draws on a wider range of monetary policy instruments than those used in Western economies. These chiefly comprise the seven-day Reverse Repo Rate (RRR), the Medium-term Lending Facility (MLF), interventions in the foreign exchange market 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 allows China’s central bank to influence the Chinese Renminbi’s exchange rates.

Can privately owned banks operate in China?

Yes. There are 19 private banks in China, accounting for only a small part of its 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 permitted domestic lenders funded entirely by private capital to enter its state-dominated financial sector in 2014.

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