PBOC’s USD/CNY reference rate moves to 6.7192 from the previous 6.7200

The USD/CNY central rate for Wednesday’s upcoming trading session has been set at 6.7192 by the People’s Bank of China (PBOC), below the previous day’s fixing of 6.7200 but above the Reuters estimate of 6.6779.

PBOC: Key Questions Answered

What Is the Role of the People's Bank of China?

Safeguarding price stability, including exchange rate stability, and supporting economic growth are the principal 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 the PBoC Owned and Managed?

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 has a key influence over the PBoC’s management and direction. The Chairman of the State Council nominates the Committee Secretary. Mr Pan Gongsheng, however, currently occupies both posts.

Which Key Instruments Shape PBoC 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 a seven-day Reverse Repo Rate (RRR), the Medium-term Lending Facility (MLF), intervention in foreign exchange markets 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 use LPR changes to influence the exchange rates of the Chinese Renminbi.

Can Private Banks Operate in China?

Yes. There are 19 private banks in China, 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. China permitted domestic lenders funded entirely by private capital to enter its state-dominated financial sector in 2014.

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