PBOC lowers USD/CNY reference rate to 6.7147 from 6.7165

For Thursday’s upcoming trading session, the USD/CNY central rate has been fixed at 6.7147 by the People’s Bank of China (PBOC). This compares with the previous day’s fixing of 6.7165 and the Reuters estimate of 6.6596.

Understanding the PBOC: FAQs

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

Maintaining price stability, including exchange rate stability, and supporting economic growth are the core monetary policy objectives 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 governed?

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 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 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. Its main tools 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 earned on savings. The central bank can also influence the exchange rates of the Chinese Renminbi by adjusting the LPR.

Can private banks operate in China?

Yes. There are 19 private banks in China, though they account 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 China’s state-dominated financial sector in 2014.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights