6.7146: PBOC sets USD/CNY reference rate, compared with 6.7138 previously

6.7146 is Monday’s USD/CNY central rate. The People’s Bank of China (PBOC) set the fixing for the forthcoming trading session against Friday’s 6.7138 and the Reuters estimate of 6.6625.

PBOC: Key facts

The People's Bank of China’s mandate

Price stability, including exchange rate stability, and economic growth are the core monetary policy goals of the People's Bank of China (PBoC). Its remit also includes pursuing 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 plays a key role in shaping the bank’s management and direction. The Chairman of the State Council nominates the Committee Secretary. Mr. Pan Gongsheng currently occupies both the secretary and governor posts, however.

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 the seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange intervention and 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 interest paid on savings. Through LPR changes, China’s central bank can also influence Chinese Renminbi exchange rates.

19 private banks in China’s financial system

China permits private banks and has 19, representing only a small share of its 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 allowed to enter the state-dominated financial sector in 2014.

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