Key Moments
- The People’s Bank of China set the USD/CNY central parity rate at 6.7399 for the upcoming Thursday session.
- The new fixing compared with the previous Thursday’s reference rate of 6.7489.
- The latest fixing level contrasted with a Reuters estimate of 6.7085.
Updated USD/CNY Central Parity Setting
On Monday, the People’s Bank of China (PBoC) set the central reference rate for USD/CNY at 6.7399 for the trading session ahead on Thursday. This latest fixing was higher than the 6.7085 rate estimated by Reuters and followed last Thursday’s official central parity of 6.7489.
| fixing reference | USD/CNY level |
|---|---|
| Latest official central rate (for Thursday session) | 6.7399 |
| Previous Thursday’s official fix | 6.7489 |
| Reuters estimate | 6.7085 |
Mandate and Role of the People’s Bank of China
The People’s Bank of China serves as the central bank of the People’s Republic of China and is responsible for monetary policy and exchange rate management. Its main objectives include maintaining price stability, which encompasses exchange rate stability, and supporting economic growth. The institution also plays a role in advancing financial reforms, including efforts to open and develop China’s financial markets.
Ownership and Governance Structure
The PBoC is owned by the state of the People’s Republic of China, meaning it is not an independent central bank. A Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, exerts significant influence over the bank’s strategic direction and management rather than the governor alone. Mr. Pan Gongsheng currently holds both the CCP Committee Secretary position and the governorship.
Policy Instruments and Benchmark Rates
The PBoC deploys a wide array of monetary policy tools. These include the seven-day Reverse Repo Rate, the Medium-term Lending Facility, foreign exchange market operations, and adjustments to the Reserve Requirement Ratio. In addition, the Loan Prime Rate (LPR) functions as China’s key benchmark lending rate.
Changes in the LPR have a direct impact on borrowing costs for loans and mortgages, as well as on returns on savings. Through movements in the LPR, the central bank can also influence the exchange rate of the Chinese renminbi.
Private Banking Presence in China
China permits the operation of private banks, though they represent a relatively small share of the overall financial system, with 19 private banks in total. Among the most prominent are digital lenders WeBank and MYbank, backed by Tencent and Ant Group respectively, according to The Straits Times.
In 2014, regulators allowed domestically funded private lenders to operate within the largely state-controlled banking sector, provided they were fully capitalized by private funds.
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