The People’s Bank of China (PBC) is the central bank of China. With the improvement of the socialist market economic system, the PBC, as a central bank, plays an important role in China’s macroeconomic management. The head office of the PBC is located in Beijing, the capital of China, and consists of 18 functional departments (bureaus).
Under the guidance of the State Council, the PBC formulates and implements monetary policy, prevents and resolves financial risks, and safeguards financial stability. PBC has a Shanghai Head Office. Its major responsibilities include part of the central bank operational functions and some of the administrative functions. PBC’s major functions (Posted on PBC Website)
(1) Drafting and enforcing relevant laws, rules and regulations that are related to fulfilling its functions; (2) Formulating and implementing monetary policy in accordance with law; (3) Issuing the Renminbi (Chinese Currency, RMB) and administering its circulation; (4) Regulating financial markets, including the inter-bank lending market, the inter-bank bond market, foreign exchange market and gold market; (5) Preventing and mitigating systemic financial risks to safeguard financial stability; (6) Maintaining the Renminbi exchange rate at adaptive and equilibrium level; Holding and managing the state foreign exchange and gold reserves; (7) Managing the State treasury as fiscal agent;
(8) Making payment and settlement rules in collaboration with relevant departments and ensuring normal operation of the payment and settlement systems; (9) Providing guidance to anti-money laundering work in the financial sector and monitoring money-laundering related suspicious fund movement; (10) Developing statistics system for the financial industry and responsible for the consolidation of financial statistics as well as the conduct of economic analysis and forecast (11) Administering credit reporting industry in China and promoting the building up of credit information system; (12)
Participating in international financial activities at the capacity of the central bank; (13) Engaging in financial business operations in line with relevant rules; (14) Performing other functions prescribed by the State Council. I will talk about three of the fourteen functions, formulating and implementing monetary policy, regulating financial markets, managing payment and settlement systems. These three functions are the most important functions of People’s Bank of China. 1. Formulating and Implementing Monetary Policy
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 applied by the PBC 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. Article 12 of the Law of the People’s Republic of China on the People’s Bank of China provides the People’s Bank of China is to establish a monetary policy committee, whose responsibilities, composition and working procedures shall be prescribed by the State Council and shall be filed to the Standing Committee of the National People’s Congress.
The Monetary Policy Committee shall play an important role in macroeconomic management and in the making and adjustment of monetary policy. Rules on Monetary Policy Committee of the People’s Bank of China stipulate that the Monetary Policy Committee is a consultative body for the making of monetary policy by the PBC, whose responsibility is to advise on the formulation and adjustment of monetary policy and policy targets for a certain period, application of monetary policy instrument, major monetary policy measures and the coordination between monetary policy and other macroeconomic policies. The Committee plays its advisory role on the basis of comprehensive research on macroeconomic situations and the macro targets set by the government.
The Monetary Policy Committee is composed of the PBC’s Governor and two Deputy Governors (five deputy governors are not in the committee), a Deputy Secretary-General of the State Council, a Vice Minister of the State Development and Reform Commission (a very powerful commission in economic area of China), a Vice Finance Minister, the Administrator of the State Administration of Foreign Exchange, the Chairman of China Banking Regulatory Commission, the Chairman of China Securities Regulatory Commission.
The Chairman of China Insurance Regulatory Commission, the Commissioner of National Bureau of Statistics, the President of the China Association of Banks and an expert from the academia. The Monetary Policy Committee performs its functions through its regular quarterly meeting. An ad hoc meeting may be held if it is proposed by the Chairman or endorsed by more than one-third of the members of the Monetary Policy Committee.
The opinions expressed in the meeting of the Monetary Policy Committee will be recorded in the form of “meeting minutes”. Such minutes or any resulted policy advice, if approved by more than two-thirds of the members of the Monetary Policy Committee, should be attached as an annex to the proposed decisions of the PBC on annual money supply, interest rates, exchange rates or other important monetary policy issues to be reported to the State Council for approval. In the case the PBC files its decisions on other monetary policy related issues with the State Council, it should enclose the meeting minutes or policy advice of the Monetary Policy Committee at the same time. 2.
Regulating Financial Markets Regulating financial markets including formulating administrative rules on the inter-bank lending market, inter-bank bond market, inter-bank foreign exchange market and gold market; reviewing and approving financial institutions’ application to access and exit these markets; assessing the implication of market instruments for monetary policy and financial stability, and providing relevant policy advice; monitoring and analyzing financial market developments and preventing cross-market risks; formulating and implementing overall credit policy in accordance with the State’s economic and social development policy and industrial policies.
Responsible for studying the issues concerning coordination of development of banking, securities and insurance industries, and in cooperation with relevant authorities, drawing up reform and development plans of the financial industry; assessing systemic risks in the financial sector, and proposing and implementing policy measures to prevent and resolve systemic financial risks; coordinating the adoption of fiscal and monetary policy measures in risk resolution; conducting re-examination on institutions that receive lender-of-last-resort support from the central bank, and participating in the liquidation or restructuring of relevant institutions;
monitoring financial holding companies and cross-sector financial instruments; examining and approving the restructuring plans for the institutions receiving lender-of-last-resort support from the central bank. The financial regulation of PBC means that PBC works as the chief organization of the nation’s financial policy, legally supervises and manages the financial institutes and their operation in the power bestowed by law to maintain the normal economic order, protects the interest of the depositors and investors, and ensures a secure, healthy, efficient operation of the financial system.
People’s Bank of China, as a government responsible offices of –financial administration, is the main body for financial regulation, and its act of supervision is deemed lawful, most of which is one-way behavior, its objects being specific people and events. What the system of the financial regulation of the PBC adopt is a concentrating and individual models of bank regulation. The financial regulation of the PBC is an important form for the financial management of national organizations. Its ultimate aim is to ensure that, the financial business is operated legally and smoothly. The financial regulation is an important way to control finance with legitimacy, and this is determined by the content and effect of the financial law peruse.
The PBC’s financial regulation is an important part of the financial regulation, which must observe the principle of legitimacy and reasonability. Administrative enforcement of the laws of the PBC is a sum of the actions which include dispensing and enforcing the financial laws, regulations and rules, according to its legitimate authority of office and legal procedures, taken by the PBC as a state organ responsible for financial administration. The intention of financial supervision and administrative enforcement of law of the PBC is identical, while the difference between them lies on the footings of their respective concept expression. 3. Managing Payment and Settlement Systems
Payment and settlement systems is the aorta that plays an important role in the financial infrastructure in nation and social fund movement, and relating to the finance and society stability, the normal movement that supports to pay the balance of accounts is important duty that the law gives the People’s Bank of China. PBC conducts and acts as the payment organizer, governor, inspector of the system, exerts the balance of accounts management working. PBC strengthens the research of paying the balance of accounts inquisition, and improve paying to settle accounts continuously. It provides support to pay the system safely and in a stable way, and serve the economy.
We should build up pay to settle accounts the direct management has a responsibility to pursue the system gradually, enhance to pay to settle accounts , maintain the accounts properly, taking note of the legal rights of the party concerned, guarding against to pay the risk and case occurrences. PBC is responsible for the design of the financial accounting system of the PBC and the construction of China National Advanced Payment System (CNAPS); establishing payment and settlement rules as well as regulations on bill exchange and bank account management, jointly with related government departments; supervising innovations in payment instruments; drafting administrative rules for bank card settlement business; and establishing reporting systems for large-value and suspicious RMB payment transactions.