China's central bank is willing to let the yuan fall to 6.8 per dollar in 2016 to support the economy, which would mean the currency matching last year's record decline of 4.5 percent, policy sources said.
The yuan is already trading at its lowest level in more than five years, so the central bank will aim to ensure a gradual decline for fear of triggering the sort of capital outflows that shook the economy earlier this year and criticism from trading partners such as the United States, said government economists and advisers involved in regular policy discussions.
Presumptive U.S. Republican Presidential nominee Donald Trump already has China in his sights, saying on Wednesday he would direct his treasury secretary to label China a currency manipulator if elected in November.
A surprise devaluation of the yuan last August sent global markets into a spin on worries the world's second-biggest economy was in worst shape than Beijing had let on, prompting massive capital outflows as investors sought safe havens overseas.
"The central bank is willing to see yuan depreciation, as long as depreciation expectations are under control," said a government economist, who requested anonymity due to the sensitivity of the matter.
"The Brexit vote was a big shock. The market volatility may last for some time."
The yuan has dropped to the new lows following Britain's vote to leave the European Union and so far the central bank has stood aside from intervening, suggesting it is happy with the currency's depreciation.
Other emerging market currencies have also fallen, but the yuan is the weakest major Asian currency against the dollar this year.
The yuan hovered near 6.64 per dollar on Thursday, just off the 5-1/2-year intraday lows and bringing its fall so far this year to about 2.3 percent.