PBOC sets USD/CNY reference rate at 6.7156 vs. 6.7180 previous

On Thursday, the People's Bank of China (PBOC) established the USD/CNY central rate at 6.7156, a slight decrease from the previous day's figure of 6.7180 and the Reuters estimate of 6.6783. The primary monetary policy goals of the PBoC are to maintain price stability, including exchange rate stability, and to foster economic growth.

The central bank also seeks to implement financial reforms, such as expanding and developing the financial market. It is important to note that the PBoC is not an autonomous institution, as it is owned by the state of the People's Republic of China (PRC). The Chinese Communist Party (CCP) Committee Secretary, appointed by the Chairman of the State Council, exerts significant influence on the PBoC's management and direction, not the governor.

The PBoC employs a diverse set of monetary policy tools, including a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions, and Reserve Requirement Ratio (RRR), to achieve its objectives. Unlike Western economies, the PBoC's benchmark interest rate is the Loan Prime Rate (LPR). Alterations to the LPR directly affect the rates for loans and mortgages, as well as the interest earned on savings, thereby influencing the Chinese Renminbi's exchange rates.

China possesses 19 private banks, a small portion of the overall financial system, with the largest private lenders being digital institutions WeBank and MYbank, backed by tech giants Tencent and Ant Group. In 2014, China permitted domestic banks fully backed by private funds to operate within the state-controlled financial sector.