"Trade and current account only play a small part in determining what is really important in the global market. Trade only makes up for 5 per cent of global trading volume, while the rest is capital flow. That is where the big uncertainty is, because China still has a relatively closed capital account," he said.

The People's Bank of China yesterday set the reference rate of the yuan at a nine-month low. The onshore yuan rate has lost 2.9 per cent this year in the spot market, while the offshore yuan rate lost 3 per cent.

The major force behind the currency's depreciation is the shifting from policy to market-driven factors, as investors turned more bearish on China's economic outlook given questions over shadow banking activities, Yao said.

Some economists believe that resulted from a policy-induced weakness.

Chinese policymakers have been encouraging currency weakness in a move to curb speculative cross-border trades profiting from differences between onshore and offshore foreign exchange rates. But over the past weeks, the decline of the yuan was mainly attributed to market forces, Yao said.

"It is difficult to know how much is by policy and how much is driven by the market," he said. "But if you look at the daily point of the exchange rate, from February to the middle of March, you see a very jumpy move of the exchange rate … that is the policy-driven part.

"But very recently, such jumpy moves disappeared and yuan trading has become more moderated. To me, that's consistent with the pessimism over the economy."