Key Moments
- The People’s Bank of China (PBOC) set the USD/CNY central parity rate at 6.7829 for Wednesday’s session.
- The new fixing compared with the prior day’s central rate of 6.7852.
- The latest fixing contrasted with a 6.7166 USD/CNY estimate reported by Reuters.
Midpoint Setting for USD/CNY
On Wednesday, the People’s Bank of China (PBOC) set the central USD/CNY reference rate for the upcoming trading session at 6.7829. This followed the previous day’s central fixing of 6.7852 and stood against a 6.7166 estimate reported by Reuters.
| USD/CNY Reference Metrics | Level |
|---|---|
| Current PBOC central parity rate | 6.7829 |
| Previous day’s central parity rate | 6.7852 |
| Reuters estimate | 6.7166 |
PBOC: Mandate and Policy Focus
The People’s Bank of China has primary monetary policy objectives that include safeguarding price stability, maintaining exchange rate stability, and supporting economic growth. The central bank also focuses on advancing financial reforms, including the opening and development of the domestic financial market.
Institutional Structure and Ownership
The PBOC is owned by the state of the People’s Republic of China (PRC), and it is not regarded as an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, who is nominated by the Chairman of the State Council, plays a central role in shaping the management and strategic direction of the PBOC rather than the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Key Monetary Policy Instruments
Compared with Western central banks, the PBOC applies a wider array of monetary policy tools to pursue its objectives. Its main instruments include the seven-day Reverse Repo Rate, the Medium-term Lending Facility (MLF), foreign exchange interventions, and the Reserve Requirement Ratio (RRR).
China’s benchmark interest rate is the Loan Prime Rate (LPR). Adjustments to the LPR affect borrowing costs on loans and mortgages, as well as returns on savings. Through changes in the LPR, the central bank can also influence the exchange rate of the Chinese renminbi.
Role of Private Banks in China
Private banks are permitted to operate in China, though they account for a relatively small share of the financial system. There are 19 private banks, with the largest being digital banks WeBank and MYbank, backed by technology firms Tencent and Ant Group, respectively, per The Straits Times.
In 2014, authorities allowed domestically owned lenders fully funded by private capital to operate within the predominantly state-controlled banking sector.
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