China adjusted its yuan exchange rate upward against dollar this Monday. However, the weaker currency has been accompanied by unexpected fall in exports. The country's exports have fallen 7.3 percent in the past year. Its imports are also low on the year over year basis.

China is also facing an increase in the capital outflow from the country. Its foreign reserve in the month of October stood at $3.12 trillion, down $45.7 billion from its reserve in the month prior. The decline in the reserve was also the steepest since January.

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The outward flight is partly attributed to the declining value of yuan against the dollar. Investors are taking their money out in order to protect the value of their investments. However, the flight of currency puts further pressure on yuan, pushing its value further down.

CNBC quoted Ayaz Ebrahim, head of Asia Pacific asset allocation, EM and APAC equities team, at J.P. Morgan Asset Management, saying, "If we look at the series of numbers coming out from China over the past 5-6 months, the trend is getting better."

Despite yuan's steep decline against dollar, it is holding steady against other major currencies such as euro and yen. Another factor contributing to the decline in the value of yen is the interest expectations in the US. It is likely that the US Federal Reserve will increase its interest rate by the end of year, causing the dollar to go up.

The Chinese government has taken various steps to help the declining yuan. These measures include keeping strict supervision over outbound transactions.

China's UnionPay recently introduced a ban on using its cards for overseas purchase of investment-linked insurance products. However, it still allows for the buying of pure insurance products. The step is likely to curb the outbound flight of Chinese money. 

Tagschina, yuan, US Federal Reserve