PBOC lifts USD/CNY reference rate to 6.7188 from 6.7168

USD/CNY heads into Friday’s trading session with a central rate of 6.7188, set by the People’s Bank of China (PBOC), against the previous day’s fixing of 6.7168.

Understanding the PBOC: FAQs

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

Safeguarding price stability, including exchange rate stability, and supporting economic growth are the key monetary policy objectives of the People's Bank of China (PBoC). Financial reforms are another priority for China’s central bank, including opening up and developing the financial market.

How is the PBoC owned and controlled?

State ownership by the People's Republic of China (PRC) means the PBoC is not regarded as an autonomous institution. Rather than the governor, it is the Chinese Communist Party (CCP) Committee Secretary who exerts a key influence over the PBoC’s management and direction. The Chairman of the State Council nominates the Committee Secretary. At present, however, Mr. Pan Gongsheng holds both posts.

Which policy instruments does the PBoC rely on?

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 foreign exchange interventions, a seven-day Reverse Repo Rate (RRR), the Medium-term Lending Facility (MLF) 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 interest earned on savings. The LPR also gives China’s central bank a means of influencing the exchange rates of the Chinese Renminbi.

Can privately owned banks operate in China?

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

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