Prior to the establishment of the People’s Republic of China and having a designated central bank, China had a handful of large banks with a presence in multiple provinces in the early twentieth century. Seven of these, comprising of the Four Northern Banks and the Three Southern Banks, played an especially significant role in the financial affairs of the country. Shanghai was a financial center of global repute at the time. Bank of China served as the central bank of China for the first decade and a half following the establishment of the Republic of China in 1912. The Chinese Civil War fought between the Kuomintang and the Communist Party of China ended in 1949 with the Bank of China splitting into two entities, the smaller of which relocated to the Republic of China (Taiwan). The Central Bank of China, established in 1924 in the city of Guangzhou and the next institution to don that mantle, also moved in 1949; its facilities in China were taken over by the People’s Bank of China, which was established on December 1, 1948, after the consolidation of the Huabei Bank, the Beihai Bank and the Xibei Farmer Bank. It began to function exclusively as the central bank beginning in September 1983. The scope of the bank’s activities is laid out by the Law of the People’s Republic of China on the People’s Bank of China. Article 23 specifies its monetary policy objective as maintaining the stability of the value of the currency and thereby promoting economic growth. The People’s Bank of China has limited political and operational independence. However, in practice, the close ties between the Communist Party of China, the People’s Bank of China and other government departments make it easier to co-ordinate policies and push economic reforms further and faster.
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