PBoC’s Deputy Governor: To continue to implement appropriately loose monetary policy

Sagar Dua FXStreet

People’s Bank of China (PBoC) Deputy Governor said during the European trading session on Wednesday that the central bank remains committed to loose monetary policy conditions to support overall demand.

Additional remarks

Will step up counter cyclical adjustments, help to expand domestic demand conditions.

7-day reverse repo rate remains the main policy rate, which provides pricing anchor for markets.

Overnight reverse repo operations will help improve liquidity management.

Studying plans to gradually increase frequency of overnight reverse repo operations.

To steadily push forward with reforms to improve policy framework.

To keep Chinese yuan currency basically stable.

Yuan currency faces both upward and downward factors, to continue to see two-way fluctuations amid global uncertainties.

Market reaction

The Australian Dollar (AUD) attracts slight bids following comments from PBoC's Deputy Governor. At press time, AUD/USD trades 0.17% higher to near 0.6986.

PBOC FAQs

What does the People's Bank of China do?

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.

Who owns the PBoC?

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.

What are the main policy tools used by the PBoC?

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.

Are private banks allowed in China?

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.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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