Sri Lanka's central bank is allowing the local rupee to become more market-oriented but like Bejing, it has shied away from turning the currency into a true free float.
The Central Bank of Sri Lanka (CBSL) said on Friday that it would stop quoting a reference rate for the currency, letting markets determine the rate instead, as sliding foreign reserves and weak exports worry officials.
"The sharp decline in Sri Lanka's foreign exchange reserves during 2015 has forced the central bank to stop intervening to stabilize the currency," Rajiv Biswas, Asia-Pacific chief economist at IHS, told CNBC on Monday.
Reserves dropped by $638 million on-month to $6.8 billion in July, down from $9.18 billion in August 2014, and only a modest recovery is expected going forward after a recent $1.1 billion currency swap agreement with the Reserve Bank of India.
"This is a welcome and overdue move...Given Sri Lanka's relatively low reserve cover, a FX peg is clearly unsustainable," Citi economist Johanna Chu noted on Monday.
However, the CBSL said it would still intervene when necessary to cap excessive volatility and prevent a depreciation free-fall.
The Sri Lankan rupee has lost 3 percent against the greenback since Beijing's landmark announcement to devalue the yuan one month ago. China is Sri Lanka's top investor and second-largest trading partner so a cheaper yuan hurts Sri Lankan goods.