PBOC: To promote cross-border use of the Yuan currency
Following are the key takeaways from the People’s Bank of China’s (PBOC) annual macro-prudential work conference.
Will step up analysis of macroeconomic and financial work.
To innovate macro prudential policy tools and promote sustained recovery of the economy.
To focus on real economy and people's need for financial services.
Will help arrest the fall in the property market and stabilise conditions.
Will develop Yuan offshore market.
To allow for currency swap and Yuan settlement to play their respective roles.
Market reaction
The Chinese proxy, the Australian Dollar (AUD) is unperturbed by these headlines. AUD/USD is trading 0.50% firmer on the day at 0.6372 as of writing.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
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