China's central bank set the yuan's midpoint against the US dollar at 6.3456 on Monday, compared with Friday's 6.3447. It's the weakest level so far this year.

The fixing of yuan's midpoint hit the lowest level so far in 2012 on Monday. To date, the Chinese currency has weakened more than seven tenths of a percent against the greenback since the start of the year. Last year, the yuan strengthened by about five percent.

Why is there such a weakening? Economists attribute the fall to China's slowing growth. The economy expanded 7.6 percent from April to June, the most sluggish pace in more than three years.

Lian Ping, Chief Economist, Bank of Communications, said, "When the Chinese economy registered double-digit growth, large amounts of foreign exchanges flowed into the country. The exchange rate of the renminbi was pushed up."

But experts say the strengthening of the US dollar could come to an end in the near future.

Lian Ping, Chief Economist, Bank of Communications, said, "I don't think it's possible that the renminbi would depreciate for a long time, for example, for one or two years."

However, the falling yuan has made foreign investors adjust their strategies. China began to see net outflows of hot money in the second quarter. The capital and financial account deficit reached 20 billion dollars in the first half of the year.

In addition, as of the end of July, foreign currency deposits sitting in China's banks exceeded 410 billion US dollars, up about two thirds year on year.

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