PBOC raises USD/CNY reference rate to 6.7188 from 6.7168

The USD/CNY central rate for Friday’s trading session has been set at 6.7188 by the People’s Bank of China (PBOC), against the previous day’s fixing of 6.7168.

PBOC: Key Questions Answered

The People's Bank of China Oversees Monetary Policy and Financial Reform

Maintaining stable prices, including exchange rate stability, and supporting economic growth are the principal monetary policy goals of the People's Bank of China (PBoC). Its remit also includes pursuing financial reforms, notably opening up and developing the financial market.

The PBoC Operates Under State Ownership

As a state-owned institution 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 who has a key influence over the bank’s management and direction. The secretary is nominated by the Chairman of the State Council. At present, however, Mr Pan Gongsheng occupies both posts.

The PBoC Deploys a Broad Range of Policy Instruments

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 borrowing costs for loans and mortgages, as well as the interest earned on savings. The central bank can also use LPR changes to influence Chinese Renminbi exchange rates.

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

Private banking is permitted in China, where 19 private banks represent only a small part of the 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 opened its state-dominated financial sector to domestic lenders funded entirely by private capital in 2014.

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