History and Legal Framework of the People’s Bank of China

Abstract

This chapter gives a short overview on the history of the People’s Bank of China (PBoC), the central bank of the People’s Republic of China, and introduces its legal environment. Upon the basis of the Central Banking Law, promulgated in 1995 and amended in 2003, the chapter illustrates the following topics: the legal status of the PBoC, its objectives and tasks, its organisational structure, the independence of the Chinese central bank, the capital and instruments of the PBoC, and its reporting obligations and supervision. The PBoC developed in an environment which is most accurately described as one of managed transition, entailing the gradual transformation of the economic system and allowing a market-oriented framework slowly to grow out of the planned economy. The legal framework creates much flexibility or—from a more formal legal perspective—a particular uncertainty regarding the role of the PBoC, which advanced from a department of the Ministry of Finance to a state organ at ministerial level with growing authority within the hierarchy of the Chinese party-state. When it comes to the question of the independence of the PBoC, the prevailing opinion in the academic literature is that the Chinese central bank’s independence is in a critical situation, given its subordinate status to the State Council. Nevertheless, the rising authority of the PBoC in China has marked a significant change in Chinese monetary institutions and policy.