The onshore yuan continued to trade around a near-15-year low against the US dollar on Tuesday, after China’s central bank surprisingly sent the reference rate to its weakest point since 2008 and the offshore exchange rate had already fallen past the threshold of 7.3 per US dollar on Monday. The onshore yuan closed at 7.3085 per dollar – its weakest level since December 2007.

“As long as China’s economy and China’s expectations are stable, the yuan will naturally be stable and will be able to withstand the tightening cycle of the dollar,” Liu Yuhui, a prominent Chinese economist, said on Tuesday on Weibo, China’s Twitter-like platform.

The fresh falling waves come amid mixed views and debate over the outlook for China’s economy as the new leadership line-up under President Xi Jinping takes the helm for the coming five years, which mark Xi’s convention-breaking third term.

Still, the recent turbulence does not appear to have reached the level of the financial market crash in 2015, which saw the Shanghai index fall by 30 per cent over three weeks, while the yuan devalued by nearly 3 per cent against the US dollar over two days.

As there has been a large change in the Chinese leadership, it will take time for the market to get to know them, and for the new leaders to prove themselves, said Hong Hao, chief economist at Grow Investment Group.

“So, the market reaction in the near-term tends to be extreme, especially on the downside,” Hong said, noting that this could be seen in Monday’s “epic sell-off”.

“Fluctuations in asset prices tend to dampen confidence, which is very low already,” Hong said. “But a weaker [yuan] actually helps exporters, as exports are priced in [US dollars]. A weaker [yuan] translates into more income for exporters.”

Stock markets are widely seen as the barometers of an economy, by shedding light on the prospect of growth and output.

The theory, however, has long been argued as not being fully applicable to China’s index, since its high fluctuation – which outpaces that of American stock indices – often means that its short-term movement is not on par with the economic fundamentals, despite a noticeable correlation in the long run.

On Monday, it was confirmed China’s economy grew by 3.9 per cent in the third quarter, beating market expectations. Industrial production was also stronger than expected, although retail sales fell short.

UBS Global Research has revised up its forecast for China’s 2022 full-year economic growth rate to 3.2 per cent from 2.7 per cent, citing the better-than-expected reading in the third quarter.

“The party congress didn’t mention short-term policies, as expected. We think the upcoming central economic work conference in December will likely shed more light on the government’s short-term policy undertaking, likely with a continued supportive stance,” said Zhang Ning, a senior China economist with the Swiss bank.

The drop in the Chinese stock and foreign-exchange markets reflects the emotional volatility in investors, caused by their weak expectations for the future, according to researchers with Anbound, an independent international think tank.

“Such large fluctuations may not be accidental in the market, under the influence of a variety of complex factors at home and abroad, the domestic capital market may have opened the prelude to new major upheaval,” they said on Monday.

“If expectations cannot recover effectively, it could be difficult for the capital market to break free of a situation in which it is ‘sensing danger at every turn’.”