USD/CNY reference rate set at 6.7180 by PBOC, compared with 6.7195 previously

USD/CNY heads into Friday’s trading session with its central rate set at 6.7180 by the People’s Bank of China (PBOC), against the previous day’s fixing of 6.7195 and the Reuters estimate of 6.6758.

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 main monetary policy goals of the People's Bank of China (PBoC). The central bank also seeks to carry out financial reforms, including opening up and developing the financial market.

Who controls and owns the PBoC?

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 Secretary is nominated by the Chairman of the State Council. At present, however, Mr Pan Gongsheng occupies 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), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). China’s benchmark interest rate, however, is the Loan Prime Rate (LPR). Adjustments to the LPR directly affect market rates payable on loans and mortgages, as well as the interest paid 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 banking is permitted in China, where 19 private banks account for only a small part of the financial system. According to The Straits Times, the largest are digital lenders WeBank and MYbank, 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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