Insights 
VT 
The People’s Bank of China (PBOC) set the USD/CNY central rate at 7.0794 for Tuesday’s trading session, up from 7.0759 the previous day. The bank’s core objectives are safeguarding price stability and promoting economic growth, while implementing financial reforms to open and develop the financial market.
The PBOC is owned by the state of the People’s Republic of China, with the Chinese Communist Party influencing its management. Both the governor’s post and the CCP Committee Secretary role are currently held by Pan Gongsheng.
Tools For Achieving Objectives
To achieve its objectives, the PBOC uses a variety of tools, such as the seven-day Reverse Repo Rate, Medium-term Lending Facility, and Reserve Requirement Ratio. The Loan Prime Rate, China’s benchmark interest rate, directly influences loan rates, mortgage costs, and the Renminbi’s exchange rates.
China permits 19 private banks, including digital lenders WeBank and MYbank, affiliated with Tencent and Ant Group. In 2014, the country allowed domestic lenders funded by private capital to function within its predominantly state-controlled financial sector.
The People’s Bank of China has set the reference rate at 7.0794, signalling it will permit a slightly weaker yuan against the US dollar. This is not an aggressive move, but it suggests that for now, authorities are more focused on economic stability than on defending a specific currency level. For traders, this indicates that short-term bets on yuan strength are likely to face headwinds from the central bank itself.
This decision aligns with recent economic data, which we have seen points to a cooling in China’s growth momentum. The latest NBS Manufacturing PMI for November 2025 came in at 49.8, indicating a slight contraction, while export growth has also moderated over the past quarter. A managed depreciation of the yuan makes Chinese goods cheaper abroad, which can provide a needed stimulus for the export sector.
The Policy Gap With The United States
We must also consider the widening policy gap with the United States, where the Federal Reserve is expected to keep interest rates relatively high through the first half of 2026. This interest rate differential naturally favors the dollar and puts upward pressure on the USD/CNY exchange rate. The PBOC’s current stance appears to be one of managing this trend rather than fighting it.
Looking back at the patterns of 2023, we saw that when similar economic pressures mounted, the USD/CNY pair gradually trended towards the 7.30 level before authorities stepped in more forcefully. Therefore, in the coming weeks, traders could view buying USD/CNY call options as a viable strategy. This approach allows for profiting from a potential gradual climb towards the 7.15 or 7.20 mark, while the PBOC’s desire for stability should cap any extreme volatility.
