PBOC sets USD/CNY reference rate at 6.7769 vs. 6.7804 previous

On Wednesday, the People's Bank of China (PBOC) set the USD/CNY central rate for the trading session at 6.7769, down from the previous day's rate of 6.7804 and the Reuters estimate of 6.7042. The primary monetary policy objectives of the PBoC are to maintain price stability, including exchange rate stability, and foster economic growth.

The central bank also seeks to implement financial reforms, such as expanding and developing the financial market. As a state-owned institution, the PBoC is not considered autonomous and its direction is influenced by the Chinese Communist Party Committee Secretary, nominated by the Chairman of the State Council. Unlike Western economies, the PBoC employs a broader set of monetary policy tools to achieve its goals, including the seven-day Reverse Repo Rate, Medium-term Lending Facility, foreign exchange interventions, and Reserve Requirement Ratio.

The Loan Prime Rate serves as China's benchmark interest rate, directly influencing loan and mortgage rates and the interest on savings. Changes to the LPR can also impact the exchange rates of the Chinese Renminbi. Currently, China has 19 private banks, with digital lenders WeBank and MYbank being the largest, backed by tech giants Tencent and Ant Group.

In 2014, China permitted domestic lenders with private funds to operate in the state-controlled financial sector.