PBOC sets USD/CNY reference rate at 6.7298 vs. 6.7313 previous

On Tuesday, the People's Bank of China (PBOC) announced the USD/CNY central reference rate as 6.7298, a slight decrease from the previous day's rate of 6.7313 and an expected 6.6981, according to Reuters. The central bank's primary goals include maintaining price stability, including exchange rate stability, and fostering economic growth.

As a state-owned institution, the PBOC is not considered autonomous and its management is influenced by the Chinese Communist Party (CCP) Committee Secretary, currently held by Pan Gongsheng, who also serves as the Chairman of the State Council. The PBOC's monetary policy tools include the seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions, and Reserve Requirement Ratio (RRR).

Unlike Western central banks, the PBOC employs a more diverse set of instruments to achieve its objectives. The LPR, China's benchmark interest rate, directly impacts loan, mortgage, and savings rates, as well as the Chinese Yuan's exchange rate. By adjusting the LPR, the central bank can influence the Renminbi's value. China has a limited number of private banks, with only 19 operating within the state-dominated financial sector.

The largest of these are digital lenders WeBank and MYbank, backed by Tencent and Ant Group. In 2014, China permitted fully capitalized private lenders to participate in the state-dominated financial system.