The People's Bank of China released its second quarter monetary policy report late on Friday local time. The PBoC said that it will fine tune its monetary policy. However, it voiced strong opposition to cutting banks deposit reserve requirement ratio (RRR). It noted that cuts to the RRR could put downward pressure on its currency and foreign reserves. The bank devoted a special box stretching over three pages to the use of the RRR as a monetary tool. The prominence given to the RRR and the PBoC's opposition to using it as a tool for monetary easing suggests that the central bank is under heavy pressure from other government ministries to further relax policy to support flagging economic growth.
The PBoC repeated that its monetary policy stance would keep the yuan stable while continuing with interest rate and exchange rate reform. The central bank hasn't cut the RRR since a surprise reduction in February to 17 percent, which followed a cut in October when benchmark interest rates were also lowered to 4.35 percent. Since its last RRR cut in February, the central bank has been relatively quiet and only used targeted tools to add liquidity to the banking system.
The Peoples Bank of China (PBoC) is mainland China's central bank with the power to control monetary policy and regulate financial institutions.
The PBoC sets interest rates for mainland China. Interest rates are always divisible by nine, instead of by 25 as in the rest of the world. The renminbi or yuan is the official currency of the Bank and is legal tender in mainland China, but not in Hong Kong and Macau.
The Bank goes back in various forms to 1948. In the 1980s, as part of economic reform, the commercial banking functions of the PBoC were split off into four independent but state-owned banks. In 1983, the State Council promulgated that the PBoC would function as the central bank of China.
Its central bank status was legally confirmed on March 18, 1995 by the 3rd Plenum of the 8th National People's Congress. In 1998, the PBoC underwent a major restructuring. All provincial and local branches were abolished, and the PBoC opened nine regional branches, whose boundaries did not correspond to local administrative boundaries. In 2003, the Standing Committee of the Tenth National People's Congress approved an amendment law for strengthening the role of PBC in the making and implementation of monetary policy for safeguarding the overall financial stability and provision of financial services. The current governor is Zhou Xiaochuan.