The People’s Bank of China (PBOC) set the USD/CNY central rate at 7.0794 for Tuesday’s trading, up from 7.0759 the day before. The PBOC aims to keep prices stable and boost economic growth while also working on financial reforms to open and develop the financial market.
The PBOC is state-owned, with management influenced by the Chinese Communist Party. Pan Gongsheng currently holds both the governor’s position and the CCP Committee Secretary role.
Tools for Achieving Objectives
To reach its goals, the PBOC uses several tools, including the seven-day Reverse Repo Rate, Medium-term Lending Facility, and Reserve Requirement Ratio. The Loan Prime Rate, China’s key interest rate, affects loan rates, mortgage costs, and the exchange rate of the Renminbi.
China allows 19 private banks, such as digital lenders WeBank and MYbank, connected to Tencent and Ant Group. In 2014, it permitted domestic lenders funded by private capital to operate within its mainly state-controlled financial sector.
The PBOC’s reference rate of 7.0794 shows it will allow a slightly weaker yuan against the US dollar. This move isn’t aggressive, indicating that the focus is currently on economic stability rather than defending a specific currency level. Traders should be aware that short-term bets on yuan strength may struggle against central bank actions.
This decision reflects recent economic data that suggests a slowdown in China’s growth. The latest NBS Manufacturing PMI for November 2025 was 49.8, pointing to slight contraction, and export growth has also slowed in the past quarter. A managed depreciation of the yuan can make Chinese goods cheaper internationally, offering a much-needed boost to exports.
The Policy Gap with the United States
It’s also important to note the growing policy gap with the United States. The Federal Reserve is expected to keep interest rates high through the first half of 2026. This difference in rates favors the dollar and puts upward pressure on the USD/CNY exchange rate. The PBOC’s current approach seems to be managing this trend instead of resisting it.
Looking back at 2023, we saw that when similar economic pressures arose, the USD/CNY exchange rate moved toward the 7.30 level before authorities stepped in more decisively. Therefore, in the coming weeks, traders might consider buying USD/CNY call options. This strategy could allow them to profit from a gradual rise towards the 7.15 or 7.20 level, while the PBOC’s focus on stability should help prevent extreme fluctuations.
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