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Key Moments

  • The People’s Bank of China set Friday’s USD/CNY central parity at 6.7787
  • The new fixing compared with the prior session’s reference rate of 6.7807
  • Friday’s official fix diverged from a 6.7098 USD/CNY estimate reported by Reuters

Daily USD/CNY Fixing Update

On Friday, the People’s Bank of China (PBoC) set the central USD/CNY reference rate for the upcoming trading session at 6.7787. This level was slightly stronger for the yuan compared with the previous day’s official fixing of 6.7807. The newly announced rate also differed from a 6.7098 estimate compiled by Reuters.

USD/CNY Fixing MetricsLevel
Friday’s PBoC central rate6.7787
Previous day’s fix6.7807
Reuters estimate6.7098

PBoC: Role and Objectives

The People’s Bank of China serves as the central bank of the country, with core monetary policy goals focused on maintaining price stability, which includes exchange rate stability, while fostering economic growth. The institution is also tasked with advancing financial sector reforms, such as the opening and development of China’s financial markets.

Institutional Structure and Governance

The PBoC is owned by the state of the People’s Republic of China (PRC), and is therefore not regarded as an autonomous central bank. Strategic direction and management are heavily influenced by the Chinese Communist Party (CCP) Committee Secretary, who is nominated by the Chairman of the State Council. This role, rather than the governor, plays a pivotal part in steering the central bank. However, Mr. Pan Gongsheng currently holds both of these posts.

Key Monetary Policy Instruments

Compared with many Western central banks, the PBoC employs a wider variety of tools to achieve its policy objectives. Its main instruments include:

  • Seven-day Reverse Repo Rate
  • Medium-term Lending Facility (MLF)
  • Foreign exchange market interventions
  • Reserve Requirement Ratio (RRR)

At the same time, the Loan Prime Rate (LPR) functions as China’s benchmark lending rate. Adjustments to the LPR affect borrowing costs for loans and mortgages, as well as the interest paid on deposits. Through changes to the LPR, the central bank can also exert influence over the exchange rate of the Chinese renminbi.

Private Banking in China

Private-sector banks operate alongside state-owned institutions in China, although they represent only a small share of the overall financial system. There are 19 private banks, with the largest being digital lenders WeBank and MYbank, which are backed by technology firms Tencent and Ant Group, respectively, per The Straits Times. In 2014, authorities permitted domestically funded lenders backed entirely by private capital to enter the state-dominated banking sector.

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