6.7162: PBOC sets USD/CNY reference rate, compared with 6.7180 previously

6.7162 is Monday’s USD/CNY central parity rate. The People’s Bank of China (PBOC) sets the fixing for the upcoming trading session against Friday’s 6.7180 and a Reuters estimate of 6.6691.

PBOC: Key Questions Answered

The People's Bank of China: Mandate and Objectives

Safeguarding price stability, including exchange rate stability, and supporting economic growth are the core monetary policy objectives of the People's Bank of China (PBoC). Its remit also includes implementing financial reforms, such as 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, the Chinese Communist Party (CCP) Committee Secretary exercises key influence over its management and direction. The Secretary is nominated by the Chairman of the State Council. Mr. Pan Gongsheng currently occupies both the governor and Committee Secretary posts.

PBoC Policy Instruments and Benchmark Rates

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 a 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, alongside the interest paid on savings. The central bank can also influence Chinese Renminbi exchange rates through changes to the LPR.

19 Private Banks in China’s Financial System

19 private banks operate in China, accounting for only a small share of its 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 permitted to enter the state-dominated financial sector in 2014.

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