CN: People's Bank of China

December 30, 2016 06:00 CST

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The People's Bank of China said on December 30 that it will emphasize a monetary policy that is prudent and "appropriately neutral" in terms of the level of tightness in 2017. The statement was made after the fourth quarter meeting of its monetary policy committee. The PBoC also said that China will keep the yuan exchange rate "basically stable" at a reasonably balanced level, further promote market-based interest rates and the yuan's formation mechanism. The PBoC also said that it will use "multiple policy tools" to maintain basically stable liquidity and realize reasonable growth in money, credit and social financing.

The Peoples Bank of China (PBoC) is mainland China's central bank with the power to control monetary policy via interest rate moves. The PBoC also regulates financial institutions. The objective of the monetary policy is to maintain the stability of the value of the currency and thereby promote economic growth. The monetary policy instruments used by the PBoC include reserve requirement ratio, central bank base interest rate, rediscounting, central bank lending, open market operation and other policy instruments specified by the State Council.

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.