1) PBC's plan is to reverse momentum and boost strong RMB expectation in the first half of year for domestic/international agenda (congress meeting, SDR, AIIB, MSCI); 2) PBC will expand floating band when CNY/USD is stably below central parity; 3) Fundamentally, weakening RMB will be more fit to status quo, and PBC knows that.
As a quick follow-up: China's economic health is based upon the treatment of two neoplastic tumors, dislocated debt and tightening liquidity; for the former, Chinese uses radiotherapy to control hyperplasia thus far, while it desires to extirpate the latter one surgically. The takeaways are: 1) The administration has been starting to translate short-term/high-rate debt to long-term/low-rate; 2) Money market turns into a time bomb due to exacerbating maturity mismatch; 3) PBC has initiated to add pressure on overnight rate like shibor, simultaneously elevating expectation on 10-year treasury yield.
In short, the strategy is exchanging space with time.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.