USD/CNY reference rate set by PBOC at 6.7191, up from 6.7167 previously

USD/CNY heads into Wednesday’s trading session with a central rate of 6.7191, set by the People’s Bank of China (PBOC). This compares with the previous day’s fixing of 6.7167 and the Reuters estimate of 6.6855.

PBOC: Key Questions Answered

What is the People's Bank of China responsible for?

Maintaining price stability, including a stable exchange rate, and supporting economic growth are the core monetary policy goals of the People's Bank of China (PBoC). Alongside these objectives, China’s central bank seeks to advance financial reforms, including opening up and developing the financial market.

How is the PBoC owned and directed?

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 exercises 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 principal tools comprise the seven-day Reverse Repo Rate (RRR), the Medium-term Lending Facility (MLF), foreign exchange interventions 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 through changes to the LPR.

Can privately owned banks operate in China?

Private banks are permitted in China, which has 19 such lenders, accounting for only a small part 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 operate in China’s state-dominated financial sector in 2014.

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