People's Bank of China: why it is essential for Forex
As the Onlinemarketshare broker focuses on the global economic market, it is important for us to see the big picture, how today's leaders and major market players took their positions. That is why today we want to tell you how one of the world economy's trendsetters and the most important regulators, the People's Bank of China, was formed.
The Chinese economy is one of the fastest-growing economies in the world. Even at the height of the global crisis, its growth can amount to 8% per year. This was largely facilitated by the reforms carried out by the State Council of the PRC. The ruling party provided the reform of currency regulation, establishing common exchange rates of the main currencies against the renminbi, creating a unified system of currency settlements. Besides, they established a single interbank foreign exchange market, which led to an increase in the world trade surplus. At the end of 2008, China's foreign exchange reserves reached the level of 2 trillion US dollars (1300 times compared to 1978); at the moment, this figure has already exceeded 3 trillion. The People's Bank of China played the most important role in this process. And that’s why Onlinemarketshare review shows that renminbi is a potential source of income.
From Communism to Open Market
The result of the reform era that began in China in 1978, as the Onlinemarketshare review discovered, was provided in a form of transformation of all economic sectors, including banking. The main principle that guided the reformers in that process was the correspondence of the banking system to a socialist market economy. A Chinese proverb says: "No matter what a cat looks like if it catches mice." Therefore, the communist principles of building Chinese society do not prevent it from adopting the world's most advanced economic and management achievements. Banking has played an important role in strengthening and improving macro-regulation and macro-control in stimulating economic reform; it contributed to the openness of the country and the preservation of social stability.
Over the past few years, China has made great strides in banking. The financial organization system has gradually strengthened, and the financial market system has improved every day. Onlinemarketshare forex specialists have also found that the level of financial macro-regulation has increased significantly, financial control has been refined, and external relations in this area have been expanding step by step. The level of service has also obviously risen.
At the beginning of the 90s, the banking system of China underwent a number of serious transformations. At the head of the entire industry now stands the People's Bank of China, which acts as the Central Bank. Its function was defined as conducting independent monetary policy to stabilize the national currency under the general guidance of the PRC State Council. It was followed by three secondary banks, providing non-profit lending programs in the framework of the state policy for the development of industries and regions; four state specialized banks and fourteen commercial banks followed the way. Onlinemarketshare scam analysts find this system quite effective in preventing crises.
After the formation of the PRC, the People's Bank of China, acting as the Central Bank, at the same time engaged in managing industrial and commercial loans and savings of citizens. Therefore, it was not a central bank, and at the same time, it was not a commercial bank. Onlinemarketshare broker review specifies that after 1978, the number of major reforms were carried out in the banking sector of the country. At the same time, there were great advances in expanding foreign relations, and as a result, the banking system became extremely stable.
Since 1984, the People's Bank of China has ceased to engage in lending and savings. It has officially begun to act as the central bank, carrying out macro-management and control over the whole country's banking business, having notable successes. After 1985, a floating interest rate market and stock markets arose. In 1988, treasury bonds markets were opened in the most important large and medium-sized cities. In 1990 and 1991 (based upon the information from Onlinemarketshare.com reviews), stock exchanges were established in Shanghai and Shenzhen, where stocks began to flow freely.
In 1994, China carried out a reform of currency regulation, and as a result, common rates of major currencies to renminbi were introduced (it was also called yuan, which means "people's money" in Chinese). A unified system of currency settlements, sales, and transfers was created, and on this basis a unified interbank foreign exchange market was created. It significantly affected the economic development of China, as well as its reform and openness policies. Onlinemarketshare broker believes this moment to be pivotal for the economy of China.
Main Financial Institution in Second-large Economy
Today, China has formed a financial system in which the central bank exercises regulation and control, and state-owned banks are the main entities. The financial flows of a political and commercial nature are separated, cooperation between various financial institutions and their functional complementarity is supported. The stable development of the financial sector is facilitated by important reforms and the gradual expansion of its external openness, which began with a policy of reform carried out since 1979.
The PBC is headed by the Chairman, represented by the Prime Minister of the State Council of the PRC, and approved by the All-China Congress of People's Representatives. Onlinemarketshare review notes that Yi Gan currently manages the Bank of China. The structure of the PBC is divided into 18 functional departments. For a more efficient implementation of activities, the PBC branches' apparatus has been created, which operates in a specific jurisdictional area and performs operations responsibilities. The branch office also has an essential function of distributing China's national currency from the equity fund.
The PBC sets the reserve fund norm, used to approve deductions from financial organizations up to the approved requirements. Onlinemarketshare forex also finds it attractive that it acts as a creditor of commercial banks, carries out operations with government and government bonds, and with currency too. The PBC manages the State Repository, and also, using a power of attorney received from the Finance Department of the State Council, can carry out cash settlements of public debts.
As the main bank of China, the PBC can carry out intermediary operations between various financial organizations, control the system of mutual settlements. Onlinemarketshare scam analysts believe such nation-focused banking to be pretty strong. Despite all the breadth of functions performed, only after the relevant decision of the State Council of the People's Republic of China can the PBC lend to pre-agreed non-financial organizations. In other cases, lending to non-financial institutions, individuals, and organizations, various levels of government, and local governments is prohibited.
A feature of the PBC as the Central Bank of China is lending to development banks, in turn, their feature is the provision of interest-free loans. Onlinemarketshare broker review also emphasizes that despite the development cooperation of banks with major international financial organizations, the banks themselves are not involved in the international financial market at all. This can be explained by the concentration of their activities within their own state, working with their own currency. According to some analysts, such a system is outdated. It is believed that lending to marginal facilities does not meet the requirements of a market economy. But, apparently, China has its own opinion on this matter, and therefore the influence of development banks is growing steadily.
China follows the principle of single currency regulation. It is carried out by the Main State Administration of Foreign Exchange Control. The Central Bank of China regulates fluctuations in the exchange rate of the national currency by linking it to a basket of currencies - the main trading partners of the country. Important components of the basket are the US dollar, euro, Japanese yen. Based on the results of trading on the interbank foreign exchange market, formed by commercial banks authorized by the central bank (an analog of the so-called "primary dealers" in the USA), the People's Bank of China sets the official closing rate for the renminbi relative to the currency basket daily. Bidding begins the next day with this exact rate. Onlinemarketshare.com reviews state that the size of daily fluctuations never exceeds 0.3% of this rate, both upwards and downwards. And yet those fluctuations form a various options for traders to earn on currency trading with renminbi-based pairs.
In reality, the RMB quotes fluctuate during the afternoon sessions much less significantly. The average size of daily fluctuations rarely exceeds 0.04%. Experts at Onlinemarketshare forex say that the People's Bank of China is restraining the renminbi due to massive currency interventions. The cheapness of Chinese goods in the world market leads to sharp distortions both in the global and in the Chinese economy. China's foreign trade surplus sets records every month. A huge influx of export earnings into the country's financial system allowed the People's Bank of China to accumulate colossal gold and foreign exchange reserves. At the end of 2008, they were valued at 1.9 trillion dollars. The structure and composition of these reserves is a state secret, but it is known that among them are American debt securities and treasury bonds.
China's gold reserves are estimated at 600 tons. This is relatively small (Russia has about 400 tons, and the USA has more than 8000). But (in accordance to Hong Kong banks), China is considering an increase in its gold reserves by 4,000 tons. If this information is confirmed, then, undoubtedly, it will become important news stimulating the growth of gold prices in the international market.
China is becoming an increasingly active and powerful participant in the economic life of the planet. For forty years of reform, it managed to increase its foreign trade turnover by a factor of 100, raise it from 20 to 3000 billion, that is, up to three trillion dollars. The growing role of China in the global economy over time can make many countries include the yuan/renminbi in reserve currencies, Onlinemarketshare review believes. Many analysts believe that the growth rate of China's economy will bring it to first place in the world by 2025. Consequently, the Chinese yuan may soon become one of the world's reserve currencies. In this case, the authority and influence of the People's Bank of China will increase significantly. And it looks like in 2020 China will become the only country having its economy strong enough to show some growth even after the pandemic.
Analysts at the Onlinemarketshare broker state that they will continue their observations of PBC in order to stay in tune with the world's ever-changing trading environment and to provide the best broker services possible.
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