PBOC Slightly Lifts Daily Yuan Fix Against the U.S. Dollar

Key Moments

New USD/CNY Central Parity Setting

The People’s Bank of China (PBoC) set the central reference rate for the onshore US dollar – Chinese yuan pair (USD/CNY) at 6.7928 for the upcoming Tuesday trading session. This compares with the prior session’s official fixing level of 6.7911.

PBoC Mandate and Policy Role

The People’s Bank of China is responsible for overseeing the country’s monetary policy. Its main objectives include maintaining overall price stability, which also covers exchange rate stability, and supporting economic growth. The central bank is also tasked with driving financial sector reforms, including measures aimed at opening up and advancing China’s financial markets.

The PBoC is owned by the state of the People’s Republic of China and is not regarded as an independent institution. The Chinese Communist Party Committee Secretary, who is nominated by the Chairman of the State Council, plays a central role in guiding the central bank’s management and strategic direction rather than the governor. Mr. Pan Gongsheng currently holds both positions.

Key Monetary Policy Instruments

The PBoC applies a wide range of tools to conduct monetary policy. Its main instruments include a seven-day Reverse Repo Rate, the Medium-term Lending Facility, foreign exchange interventions, and the Reserve Requirement Ratio.

China’s benchmark interest rate is the Loan Prime Rate (LPR). Adjustments to the LPR have a direct effect on borrowing costs for loans and mortgages, as well as on the interest income received on deposits. Through changes in the LPR, the central bank can also influence the exchange rates of the Chinese Renminbi.

Private Banking Landscape in China

Private banks are permitted to operate in China. There are 19 private banks, which account for only a small share of the overall financial system. The largest among them are the digital lenders WeBank and MYbank, backed by technology companies Tencent and Ant Group, as reported by The Straits Times.

In 2014, authorities allowed domestic banks funded entirely by private capital to participate in the state-dominated banking sector, creating room for privately capitalized lenders alongside state-owned institutions.