USD/CNY reference rate moves to 6.7195 as PBOC sets fixing, versus 6.7192 previously

USD/CNY heads into the upcoming trading session with a central rate of 6.7195, set on Thursday by the People’s Bank of China (PBOC). This compares with the previous day’s fixing of 6.7192 and the Reuters estimate of 6.6756.

PBOC: Key Questions Answered

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

Maintaining price stability, including exchange rate stability, 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 carry out financial reforms, including opening up and developing the financial market.

How is ownership of the PBoC structured?

As a state-owned institution of the People's Republic of China (PRC), the PBoC is not regarded as autonomous. Key influence over its management and direction rests with the Chinese Communist Party (CCP) Committee Secretary rather than the governor. The Secretary is nominated by the Chairman of the State Council. At present, however, Mr. Pan Gongsheng holds both posts.

Which 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), foreign exchange interventions and the Reserve Requirement Ratio (RRR). China’s benchmark interest rate, however, is the Loan Prime Rate (LPR). Adjustments to this rate directly affect market borrowing costs for loans and mortgages, as well as the interest paid on savings. The central bank can also influence Chinese Renminbi exchange rates by adjusting the LPR.

Can privately owned banks operate in China?

Yes. With 19 private banks, private banking accounts for only a small share of China’s 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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