The People’s Bank of China (中国人民银行, PBOC) is the central bank of the People’s Republic of China, and has as its primary mandate the formulation and implementation of monetary policy under the leadership of the State Council.
PBOC is also entrusted with a broad range of other roles and responsibilities, including management of China’s foreign reserves, the formulation of exchange rate policy, the regulation of financial institutions, the prevention and resolution of systemic financial risk and the preservation of financial stability.
According to the provisions of the “People’s Republic of China People’s Bank of China Law” (中华人民共和国中国人民银行法) PBOC is responsible for the lawful, independent implementation of monetary policy under the leadership of the State Council. and is not subject to the interference of any local governments, social groups or individuals.
PBOC is one of the 25 cabinet-level Departments Constituting the State Council (国务院组成部门), alongside the 20 central ministries, the three commissions and the National Audit Office.
The Chinese Soviet Republic National Bank
The history of PBOC can be traced back to the founding of the Chinese Soviet Republic National Bank (中华苏维埃共和国国家银行) on 1 February 1932 in the Jiangxi province city of Ruijin during the early stages of the Chinese Civil War.
The Chinese Soviet Republic (CSR), also known as the Jiangxi Soviet, approved the establishment of the CSRNB at its inaugural representatives meeting in November 1931.
CSRNB was entrusted with the issuance of banknotes and coins in areas controlled by the Chinese Communist Party, as well as the provision of loan, deposit, bill and government bond services.
The governor of the bank was Mao Zemin (毛泽民), the younger brother of Mao Zedong.
During the period from 1935 – 1936 the bank moved to Shanbei with the Red Army, where it was renamed the Chinese Soviet Republic National Bank-Northwest Branch （中华苏维埃共和国国家银行西北分行).
Due to the political turmoil of the Chinese Civil War and the Sino-Japanese War, CSRNB exerted little real influence in China during its existence, with a range banks issuing their own local currencies within a multitude of fractured jurisdictions.
CSRNB was dissolved and renamed the Shensi-Kansu-Ninghsia Border Area Bank (陕甘宁边区银行) in 1937.
Official Founding and the Reconstruction Period (1948 – 1952)
The People’s Bank of China was established on 1 December 1948 in Shijiazhuang, Hebei province, via the merger of the Huabei Bank, the Beihai Bank and the Xibei Farmer Bank.
The founding of PBOC took place just as the Liaoshen, Huaihai and Pingjin campaigns destroyed the main forces of the Chinese Nationalist army and secured control of northern China for the CCP.
On the day of its founding the North China People’s Government issued a public decree announcing that PBOC would be responsible for the issuance of a standard currency – the renminbi, which would be the monetary unit for all public and private payments and all transactions within the three regions of northern China, eastern China and the north-west.
In February 1949 PBOC relocated from Shijiazhuang to Beijing, and in September 1949 the Chinese People’s Political Consultative Conference passed the “People’s Republic of China Central People’s Government Organisation Law” (中华人民共和国中央人民政府组织法), which included PBOC on the roster of authorities directly under the Government Administration Council of the Central People’s Government.
PBOC was subject to the leadership of the Finance and Economy Committee (财政经济委员会) and maintained a close association the Ministry of Finance
It emerged as the national bank of the fledgling People’s Republic of China, establishing a nation-wide vertical organisation and a range of branch entities.
Its responsibilities included the issuance of the national currency, the management of the state treasury, the regulation of the national financial system, the stabilisation of financial markets and the provision of support for economic revival and national reconstruction.
During the first several years of its existence during China’s post-war reconstruction period (1949 – 1952) PBOC sought to rapidly establish the renminbi as the standard national currency of the People’s Republic of China, by gradually exchanging and replacing the currency issued in KMT areas that came under CCP control.
PBOC also worked with other financial and economic authorities of the central government to tame the raging inflation that afflicted China during the Civil War and the Sino-Japanese War.
Based on a policy of “equal concern for both public and private, benefit for both labour and capital, mutual assistance between the cities and the countryside, and domestic-foreign exchanges” (公私兼顾、劳资两利、城乡互助、内外交流”), PBOC provided financial support to various sectors of public, private and collective economies and stabilised the renminbi.
The Planned Economy Period (1953 – 1978)
During China’s planned economy period PBOC emerged as the exclusive officials means by which capital was gathered and allocated, following the nationalisation and consolidation of private banks and the creation of a highly centralised financial system.
Starting from 1953 China established a comprehensive and centralised system for the planning and administration of credit, which gave PBOC full control of credit and funds throughout the country.
This form of “unified deposit and unified loan” administration was also a part of economic planning by the central government, and a key instrument for exercising control of the economy.
Under China’s planned economy PBOC was responsible for organising and adjusting monetary flows, centralised management of various credit operations and monetary supervision.
It provided liquidity loans and seasonal loans to state-owned enterprises, as well as production and liquidity loans to urban and rural collectives.
Transition from a National Bank to a Central Banking System (1979 – 1992)
Reform of the finance system kicked off in earnest in 1979, following the establishment of official diplomatic relations between the People’s Republic of China and the United States.
In January 1979 the central government established the Agricultural Bank of China was to provide support to the rural economy, and in March designated the Bank of China as its specialist foreign exchange bank.
In addition to reforms of the banking sector, the same year also saw the establishment of the State Administration of Foreign Exchange and the revival of domestic insurance operations
Official Functions and Duties
According to its official website PBOC has a total of 18 official functions.
- The formulation of financial sector reform and development strategy plans, undertaking the responsibility of comprehensive research into and coordinated resolution of major problems during financial operation, and expediting the coordinated and healthy development of the finance sector; participation in the assessment of major financial takeover activities that have an impact upon national financial security, and submitting policy recommendations; expediting the orderly opening of the financial sector.
- Drafting relevant laws and administrative regulations, improving relevant financial institution operating regulations, and issuing and implementing decrees and regulations in relation to the performance of its official functions.
- Lawfully drafting and implementing monetary policy, and drafting and implementing macro-credit guidance policies.
- Improving the financial macro-adjustment system, responsibility for preventing and resolving systemic financial risk, and the preservation of national financial stability and security.
- Responsibility for the formulation and implementation of renminbi exchange rate policy, the constant improvement of exchange rate formation mechanisms, the preservation of a stable balance of payments, and the implementation of foreign exchange management. Responsible for the tracking and monetary of international financial markets and early risk warnings; the monitoring and management of cross-border capital flows, and the holding, management and operation of the state’s foreign exchange reserves and gold reserves.
- Supervision and management of the interbank lending market, the interbank bond market, the interbank notes market, the interbank foreign exchange market and the gold market, as well as derivatives product transactions involving the aforementioned markets.
- Responsible for the formulation of financial holding company supervisory regulations and cross-finance business benchmarks and standards in cooperation with financial regulatory departments. Responsible for the supervision and monitoring of financial holding companies and cross-financial instruments.
- Bears the responsibility of serving as lender of last resort; responsible for the inspection and supervision of the conduct of financial institutions that make use of central bank funds in order to resolve financial risk.
- The formulation and organisation and implementation of comprehensive financial sector statistical systems; responsible for data gathering and macro-economic analysis and forecasting; the unified formulation of national financial statistical data and reports, and their public release in accordance with the relevant provisions of the state.
- The organisation and formulation of finance sector digitisation development plans; responsibility for organisation, regulation and coordination work for financial standardisation, and the guidance of finance sector information safety work.
- The issuance the renminbi and the management of the renminbi’s circulation.
- The formulation of national payments system development plans, the overall preparation and coordination of national payment system establishment, and the formulation of payment and settlement regulations in cooperation with financial regulatory departments. Responsible for the regular functioning of the national payments and settlements system.
- Management of the national treasury.
- Bears the responsibility for organisation, coordination and supervision and management of national anti-money laundering work. Responsible for the monitoring of funds suspected of involvement with money laundering and terrorist activity.
- Management of the credit sector, advancing the establishment of a social credit system.
- Engaging in international financial activities that are relevant to the People’s Bank of China.
- Engaging in financial business activities in accordance with the relevant provisions.
- Undertaking other matters as entrusted by the State Council.