Key Moments
- The People’s Bank of China set the USD/CNY central parity rate at 6.7162 for Monday’s session.
- Monday’s fixing came in slightly stronger for the yuan compared with Friday’s 6.7180 level.
- The new central rate differed from a 6.6691 estimate cited by Reuters.
Latest USD/CNY Central Parity Setting
On Monday, the People’s Bank of China (PBOC) set the central USD/CNY reference rate for the upcoming trading session at 6.7162. This compares with the previous trading day’s official fixing of 6.7180 and a 6.6691 estimate reported by Reuters.
| Fixing Reference | USD/CNY Level |
|---|---|
| Monday PBOC central rate | 6.7162 |
| Friday PBOC fix | 6.7180 |
| Reuters estimate | 6.6691 |
Mandate and Role of the People’s Bank of China
The primary monetary policy goals of the People’s Bank of China are described as safeguarding price stability – including exchange rate stability – and supporting economic growth. The central bank is also tasked with pushing forward financial sector reforms, such as the opening and development of China’s financial markets.
The PBOC is owned by the state of the People’s Republic of China and is not regarded as an independent institution. The Chinese Communist Party (CCP) Committee Secretary, who is nominated by the Chairman of the State Council, has significant influence over the central bank’s strategic direction and management, rather than the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
PBOC Policy Instruments and Benchmark Rates
The PBOC employs a relatively broad toolkit to pursue its policy objectives. Key instruments include the seven-day Reverse Repo Rate, the Medium-term Lending Facility (MLF), foreign exchange operations, and the Reserve Requirement Ratio (RRR).
China’s benchmark lending reference is the Loan Prime Rate (LPR). Adjustments to the LPR directly affect borrowing costs on loans and mortgages, along with returns on savings in the domestic market. Through changes to the LPR, the central bank can also influence the external value of the Chinese renminbi.
Private Banking Presence in China
Private-sector banks are permitted to operate in China, although they represent a relatively small segment of the financial system. There are 19 private banks, with digital lenders WeBank and MYbank – backed by Tencent and Ant Group, respectively – cited as the largest. In 2014, authorities allowed domestically funded lenders fully capitalized by private capital to participate in the state-dominated banking sector.
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