Key Moments
- The People’s Bank of China set the USD/CNY central parity at 6.7628 for Wednesday’s session.
- The new fixing compared with the previous day’s rate of 6.7670.
- Reuters estimated a prior level at 6.7148 for reference.
Session Fixing Details
On Wednesday, the People’s Bank of China (PBOC) set the central USD/CNY reference rate at 6.7628 for the upcoming trading session. This fixing compared with the prior day’s official level of 6.7670 and a Reuters estimate of 6.7148.
| Reference | USD/CNY Level |
|---|---|
| Current PBOC central rate (Wednesday) | 6.7628 |
| Previous day’s official fix | 6.7670 |
| Reuters estimated level | 6.7148 |
PBOC – Mandate and Objectives
The People’s Bank of China focuses its monetary policy on maintaining price stability, including stability in the exchange rate, while also supporting economic growth. In addition, the central bank works to advance financial sector reforms, such as opening and developing China’s financial markets.
Institutional Structure and Control
The PBOC is owned by the state of the People’s Republic of China, and is therefore not regarded as an independent institution. Strategic direction and management are strongly influenced by the Chinese Communist Party (CCP) Committee Secretary, who is nominated by the Chairman of the State Council rather than by the PBOC governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Policy Instruments and Benchmark Rates
The PBOC employs a wide range of monetary policy tools, differing from the frameworks used in many Western economies. 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).
The Loan Prime Rate (LPR) serves as China’s benchmark interest rate. Adjustments to the LPR directly affect borrowing costs for loans and mortgages, as well as returns on savings in the market. 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 operate in China, though they account for only a small share of the overall financial system, with 19 such institutions in existence. The largest among them are the digital lenders WeBank and MYbank, which are backed by Tencent and Ant Group, respectively, according to The Straits Times.
In 2014, China permitted domestically owned lenders that are fully capitalized by private funds to participate in the state-dominated banking sector.
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