People's Bank of China Adopts Managed Floating Exchange Rate Regime

The People's Bank of China announced the adoption of a managed floating exchange rate regime, which relies on market supply and demand and references a basket of currencies. The People's Bank of China stated that the market plays a decisive role in exchange rate formation. The central bank confirmed it does not set a target level for the renminbi or seek to alter its long-term trend, while maintaining exchange-rate flexibility and two-way movement.

The shift clarifies the principles governing the renminbi's valuation, indicating that exchange rates are shaped by multiple forces, including economic growth, monetary policy, financial markets, and geopolitical developments. The People's Bank of China cautioned against attributing currency movements to a single indicator.