Key Moments
- The People’s Bank of China set the USD/CNY central parity rate at 6.7411 for the upcoming Tuesday session.
- The new fixing compares with the previous day’s central rate of 6.7399.
- The 6.7411 fixing differed from a Reuters estimate of 6.7177.
Updated Central Parity Rate
The People’s Bank of China (PBOC) set the central USD/CNY reference rate for the next trading session on Tuesday at 6.7411. This compares with the prior day’s official fixing of 6.7399 and a Reuters projection of 6.7177.
| USD/CNY Reference | Rate |
|---|---|
| New PBOC central parity (Tuesday session) | 6.7411 |
| Previous day’s official fix | 6.7399 |
| Reuters estimate | 6.7177 |
PBOC Mandate and Policy Role
The People’s Bank of China is responsible for pursuing monetary policy objectives that focus on maintaining price stability, which includes stabilizing the exchange rate, while also supporting economic growth. The central bank is additionally tasked with advancing financial sector reforms, including 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 and is not regarded as an independent institution. A Chinese Communist Party Committee Secretary, nominated by the Chairman of the State Council, plays a decisive role in shaping the central bank’s management and policy direction rather than the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Key Monetary Policy Instruments
The PBOC uses a wide range of tools to implement monetary policy. These include the seven-day Reverse Repo Rate (RRR), the Medium-term Lending Facility (MLF), foreign exchange interventions, and adjustments to the Reserve Requirement Ratio (RRR). In addition, the Loan Prime Rate (LPR) functions as China’s benchmark lending rate.
Changes in the LPR affect loan and mortgage costs, as well as returns on savings, across the market. By altering the LPR, the central bank can also influence the exchange rate of the Chinese renminbi.
Private Banking Presence in China
Private banks operate alongside state-owned institutions in China’s financial system. There are 19 private banks, which represent a relatively small segment of the overall sector. The largest among them are digital lenders WeBank and MYbank, which are backed by Tencent and Ant Group, respectively, according to The Straits Times.
In 2014, authorities permitted domestically funded lenders fully capitalized by private capital to participate in the state-dominated banking landscape.
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