On Friday, the People’s Bank of China (PBOC) set the USD/CNY central rate for the forward trading session at 7.0875, compared with the previous day’s fix of 7.0905 and a Reuters estimate of 7.1154.
PBOC FAQs
The primary objectives of the People’s Bank of China (PBoC) monetary policy are to protect price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to carry out financial reforms such as opening up and developing the financial market.
The PBoC is owned by the state of the People’s Republic of China (PRC), so it is not considered an autonomous institution. The Secretary of the Committee of the Communist Party of China (CCP), nominated by the Chairman of the State Council, has the key influence on the management and direction of the PBoC, not the Governor. However, Mr. Gongsheng currently holds both of these positions.
Unlike Western economies, the PBoC uses a broader set of monetary policy tools to achieve its goals. The primary instruments include the seven-day reverse repo rate (RRR), the Medium-ter-term Lending Facility (MLF), foreign exchange interventions and the Reserve Requirement Ratio (RRR). However, the Loan Prime Rate (LPR) is China’s reference interest rate. Changes to the LPR directly affect the rates to be paid in the loan and mortgage market and the interest paid on savings. By changing the LPR, the Chinese central bank can also affect the exchange rates of the Chinese renminbi.
Yes, China has 19 private banks – a tiny fraction of the financial system. The biggest private banks are digital lenders WeBank and MYbank, backed by tech giants Tencent and Ant Group, according to The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-controlled financial sector.
