On Monday, the People’s Bank of China (PBOC) announced the USD/CNY central rate for the upcoming trading session, setting it at 7.1745. This comes after Friday’s figure stood slightly lower at 7.1738 and a predicted rate of 7.2857 by Reuters.
When it comes to its monetary policy, the People’s Bank of China (PBOC) focuses on maintaining price stability, which includes keeping the exchange rate steady, as well as fostering economic growth. Furthermore, the central bank plays a significant role in spearheading financial reforms, aiming to develop and open up the financial markets.
It’s important to note that the PBOC operates under the state of the People’s Republic of China (PRC) and is not independent. The Chinese Communist Party (CCP) Committee Secretary wields considerable influence over the bank’s management and strategic direction, rather than the governor. Notably, Mr. Pan Gongsheng currently holds both leadership roles—adding a layer of continuity in decision-making.
In contrast to Western financial institutions, the PBOC employs a wider range of monetary policy tools to meet its goals. Among these instruments are the seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions, and the Reserve Requirement Ratio (RRR). The Loan Prime Rate (LPR), on the other hand, serves as China’s benchmark interest rate. Adjusting the LPR can directly impact loan and mortgage costs, as well as the interest on savings. This, in turn, allows the PBOC to influence the exchange rates of the Chinese Renminbi.
China’s financial landscape does include 19 private banks, although they represent only a small segment of the system. Among the most prominent are WeBank and MYbank—digital lenders supported by tech powerhouses Tencent and Ant Group. Since 2014, the Chinese government has permitted domestic banks wholly funded by private capital to operate within the predominantly state-controlled financial sector.
