People's Bank of China

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People's Bank of China
Founded	1948
Headquarters	Beijing, People's Republic of China
Key People	Zhou Xiaochuan is Governor of the People's Bank of China
Website	PBOC Home (English)

The People's Bank of China (PBC) is the central bank of the People's Republic of China. Under the guidance of the State Council, the PBC formulates and implements monetary policy, prevents and resolves financial risks, and safeguards financial stability. From the period of April of 2006 to August of 2007 the central bank raised key interest rates six times. It later announced it would establish a central clearinghouse for the interbank trading market.

History

The PBC was established on Dec. 1, 1948 based on the consolidation of the former Huabei Bank, Beihai Bank and Xibei Farmer Bank. In September of 1983, the State Council decided to have the PBC function as a central bank.

On March 18, 1995 the Law of the People's Republic of China on the People's Bank of China passed by the Third Plenum of the Eighth National People's Congress legally confirmed the PBC's central bank status. In 1998, the PBC underwent a major restructuring. All provincial and local branches were abolished, and the PBC opened nine regional branches, whose boundaries did not correspond to local administrative boundaries.

In March of 2003, the First Plenum of the Tenth National People's Congress approved the Decision on Reform of the Organizational Structure of the State Council, separating the supervisory responsibilities of the PBC for the banking institutions, asset management companies, trust and investment companies and other depository financial institutions. Instead, the China Banking Regulatory Commission (CBRC) was established to supervise the financial industry. Later, in 2018, the CBRC was merged with the China Insurance Regulatory Commission (CIRC) to form the China Banking and Insurance Regulatory Commission (CBIRC).

On Dec. 27, 2003, the Standing Committee of the Tenth National People's Congress approved at its sixth meeting the amendment to the Law of the People's Republic of China on the People's Bank of China, which strengthened the role of the PBC in the making and implementation of monetary policy, in safeguarding the overall financial stability and in the provision of financial services.

Under the leadership of the State Council, the PBC implements monetary policy, performs its functions and carries out business operations independently according to laws and free from intervention by local governments, government departments at various levels, public organizations or any individuals.

The PBC needs to report to the State Council its decisions concerning the annual money supply, interest rates, exchange rates and other important issues specified by the State Council for approval before they are put into effect. The PBC is also obliged to submit work report to the Standing Committee of the National People's Congress on the conduct of monetary policy and the performance of the financial industry. All capital of the PBC is invested and owned by the state.

Management

• Yi Gang, Governor
• Wang Huaqing, Deputy Governor
• Pan Gongsheng, Deputy Governor
• Dr. Jun Ma, Chief Economist

Policy Actions

In June 2015, the bank cut both its benchmark interest rates and the amount of reserves certain banks are required to hold. The bank said the steps were taken to lower borrowing costs and stabilize growth in the Chinese economy. The PBOC cut its one-year benchmark lending rate by a quarter of a percentage point to 4.85% and its one-year deposit rate by the same scale to 2%. The PBOC has rarely cut both interest rates and the reserve-requirement ratio on the same day. The last time it did so was in October 2008 in the midst of the global financial crisis.

In July of 2012, the People’s Bank of China cut interest rates for the second time in four weeks, lowering interest on one-year loans to 6 percent and saying that banks could discount rates by as much as 30 percent below that benchmark, an increase from a 20 percent allowable discount. Analysts said the changes probably reflected uncertainty about China’s economic growth in the second quarter.

The People's Bank of China, on Oct. 19, 2010, raised interest rates for the first time in nearly three years. At the time, it represented the strongest move yet by Beijing to withdraw stimulus that helped the economy weather the global slump but threatened to fuel inflation.

China's central bank announced in late November of 2009 that it would establish a new "independent" clearinghouse to settle trades of financial products between the country's banks, the Wall Street Journal reported, allowing Chinese banks to trade forex and interest rate products with each other.A previous attempt in 2006 to establish a similar system using the CME Group's Globex trading platform fell apart because the it would have brought the PBC under the review of U.S. regulator the Commodity Futures Trading Commission. China Foreign Exchange Trade System & National Interbank Funding Center (CFETS) began centrally clearing over-the-counter (OTC) spot trades in the interbank market in mid-2009.

Cryptocurrency ban

The PBOC restricted Chinese banks' business with bitcoin on December 5, 2013. In its statement at the time the PBOC said, “Currently, the public lacks sufficient understanding of Bitcoin, and some individuals have been caught up by faddishness or a speculative mentality in holding, using and trading in Bitcoins."

In conjunction with one of the task force's first concerted actions, PBOC forbade cryptocurrency trading platforms from operating in China in the autumn of 2017, closing 13 platforms for initial coin offerings (ICOs) and 10 cryptocurrency trading platforms during the crackdown.

When financial authorities in China renewed their campaign against cryptocurrency platforms in August 2018, an adviser to the PBOC wrote that bitcoin transactions should be regulated and that ICOs would continue to be banned there.

On November 22, 2019, the Shanghai office of the PBOC, along with local financial regulatory authorities, announced a crackdown on cryptocurrency businesses. The previous day, The Block Crypto had reported that Binance's local office had been visited by police and closed.

In its toughest crackdown on the industry, in September 2021 the PBOC banned all crypto transactions and said it would root out mining of digital assets. It also declared that cryptocurrencies, including Bitcoin and Tether, are not fiat currency and cannot be circulated.

State-backed cryptocurrency

PBOC Vice Governor Fan Yifei said the PBOC was not only trying to supervise private digital currencies but also to develop its own digital money. Providing a guest view to Bloomberg in late August 2016 Fan wrote, "With internet access increasing and encryption technology improving, the conditions are ripe for digital currencies, which can reduce operating costs, increase efficiency and enable a wide range of new applications." Fan had earlier told Chinese news agency Caixin that the PBOC's goal in issuing a digital currency would be to lower the costs of supplying money to the economy.

Governor Zhou Xiaochuan of the PBOC reportedly told a press conference on March 6, 2018 that digital currency is "technologically inevitable" and further stated, "We also pay high attention to the application of technologies like blockchain and distributed ledger." The PBOC had already set up a research project but Zhou indicated that it was not in a rush to develop its own digital currency. Zhou also reiterated, “We do not currently recognize Bitcoin and other digital currencies as a tool like paper money, coins and credit cards for retail payments. The banking system does not accept it.”

In August 2019, multiple sources who had worked with the Chinese government told Forbes that seven or eight institutions in China would be issued a state-backed cryptocurrency that would be managed by the central bank of China. These institutions include the People's Bank of China, the China Construction Bank, the Industrial and Commercial Bank of China, the Agricultural Bank of China, Alibaba, Tencent, and Union Pay, as well as an eighth institution that was not named. According to the sources, it had been "ready" since 2018, and would launch as soon as November 11, 2019 - a Chinese holiday known as Singles Day, the busiest shopping day of the year in China.

A research report published on August 29 by Binance said that the digital asset will likely follow a two-tiered system; in the first tier, the PBoC will issue the digital currency to commercial banks. In the second tier, commercial banks would allow individuals to withdraw funds in the form of the digital currency and spend them at businesses in China. This virtual currency would not be designed to replace PBoC funds, the report said; rather, it will seek to eliminate yuan notes and coins from circulation within the country.

On April 3, 2020, in a teleconference regarding recent bank activities on gold, silver and cash security, the PBOC reaffirmed its intentions to "unswervingly advance the research and development of legal digital currency" (Google translation).

In April 2021, Bloomberg reported that U.S. President Joe Biden's administration had begun increasing its efforts to understand the potential threat of the PBOC's digital yuan, also called the e-CNY. According to a report by the U.S. Director of National Intelligence the extent of the e-CNY's threat to the sovereignty of the U.S. dollar, as well as its ability to circumvent U.S. sanctions, “will depend on the regulatory rules that are established.”

Despite the Biden administration's scrutiny Kazushige Kamiyama, head of the Bank of Japan’s payment systems department and the head of the bank's efforts to create a Japanese digital currency, said that month that "the dollar’s status as the key global currency won’t change so easily...In fact, the dollar’s advantage may strengthen further if the U.S. goes with digitalization.”