Domestic investors are moving money out of the country and the PBoC is bowing to pressures generated by the immense capital flight that has more than eaten up the currency inflow produced by the current account surplus since last spring.

The currency weakness, economic slowdown and the stock market turmoil could force more action. The PBoC in such a situation can either sell off more currency reserves or risk Chinese businesses being under-supplied with dollars, both options being laden with inherent dangers.

Although in the near term there may be a faster outflow of capital as the currency drops, eventually this would ease if domestic investors believed the currency was at "fair value". Faster depreciation may allow the currency more quickly reach a level that balances capital flows.

"Whatever the reason for the sharper depreciation of the CNY, we do not think that China will let the move get out of control and would prevent a sharper move or any panic in global markets - as it did following the August devaluation, admittedly doing so at a heavy cost," says Barclays in a report