Key Moments
- PBOC set the USD/CNY central parity rate at 6.7933, above the prior day’s 6.7917 level.
- The new fixing also exceeded a 6.7737 reference estimate compiled by Reuters.
- The central bank continues to use a wide toolkit, including benchmark rates and FX interventions, to pursue price and exchange rate stability.
Latest USD/CNY Central Parity Setting
On Wednesday, the People’s Bank of China (PBOC) set the USD/CNY central rate for the upcoming trading session at 6.7933. This represented a modest increase compared with the previous day’s fixing of 6.7917 and came in above a 6.7737 estimate reported by Reuters.
| USD/CNY Reference Level | Rate |
|---|---|
| New PBOC central parity | 6.7933 |
| Previous day’s fix | 6.7917 |
| Reuters estimate | 6.7737 |
PBOC Mandate and Role
The People’s Bank of China is tasked with maintaining price stability, including stability in the exchange rate, while supporting economic growth. In addition to its monetary policy responsibilities, the central bank works on advancing financial reforms and fostering the development and opening of China’s financial markets.
Ownership and Governance Structure
The PBOC is owned by the state of the People’s Republic of China and is not regarded as an independent entity. Oversight and strategic direction are significantly shaped by the Chinese Communist Party (CCP) Committee Secretary, who is nominated by the Chairman of the State Council, rather than by the governor alone. However, Mr. Pan Gongsheng currently holds both of these posts.
Key Monetary Policy Instruments
The PBOC applies a broader range of monetary policy tools than many Western central banks to meet its objectives. Its main instruments include the seven-day Reverse Repo Rate (RRR), the Medium-term Lending Facility (MLF), foreign exchange market operations, and the Reserve Requirement Ratio (RRR).
China’s Loan Prime Rate (LPR) serves as the benchmark interest rate. Adjustments to the LPR affect loan and mortgage costs and the returns on savings across the financial system. By changing the LPR, the central bank can also affect the exchange rate dynamics of the Chinese Renminbi.
Private Banking Sector in China
Private banks operate alongside state-owned institutions in China, although they represent a relatively small segment of the overall system. There are 19 private banks in the country. Among them, WeBank and MYbank are the largest and function as digital lenders backed by technology companies Tencent and Ant Group, respectively, according to The Straits Times.
In 2014, authorities permitted domestically funded lenders, fully capitalized with private capital, to enter the financial sector that had been dominated by state-owned entities.
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