In August 2015, once again, the reform of China's exchange rate system was activated, resulting in sharp depreciation of yuan and shook the market.

Although a series of measures was introduced by the regulatory departments to stabilize the market, there are growing calls for greater transparency and certainty in the RMB exchange rate formation regime particularly the reference to the basket of currencies.

ANBOUND’s research team is of the view that in light of China’s current financial system, a clear definition of RMB exchange rate regime with reference to the basket of currencies might backfire.

The anchoring of RMB exchange rate should be flexible and China should learn as it progress through the reform.