Economists at Rabobank said on Tuesday that the yuan may further depreciate against the U.S. dollar, falling by as much as 19 percent within one year.
The bank forecast the yuan will be 13 percent weaker against the dollar six months from now and as much as 19 percent lower within a year.
The process, according to Rabobank economists, will allow the value of the currency to reflect the fundamentals of the Chinese economy.
The country's economy is slowing to a 25-year low in terms of growth.
Last Thursday, an official at the foreign exchange regulator said depreciation pressure on the yuan had been "essentially relieved" since August, when the central bank unexpectedly devalued the currency by nearly 2 percent.
Economists at Rabobank said further devaluation could help boost China's slowing export growth.
"With weak demand and high debt levels, the natural thing to do is to get money from overseas by running an export surplus, but you can't do that when your currency is too strong," Michael Every, head of financial markets research Asia-Pacific of Rabobank, told the Global Times Tuesday in an exclusive interview on the sidelines of a forum in Beijing.
In the first eight months of 2015, exports dipped 1.6 percent while imports fell 14.6 percent, data from the General Administration of Customs showed. In August, exports fell 6.1 percent year-on-year, according to customs data.
Since 2012, foreign exchange rates have become increasingly volatile and the currencies of emerging markets have been "collapsing" this year, according to data from Rabobank.
Chinese Premier Li Keqiang recently said China will never start a currency war and countries should instead boost economic cooperation as the global economy remains sluggish.
To avoid currency war, countries must engage in structural reforms, make supply more efficient, allow debt defaults and address income inequality.
"The current level of China's debt is worrisome, but the pace at which the debt grows, at an estimated annual rate of 30 percent, is more alarming as this will make the model unsustainable in a few years," Jan Lambregts, global head of financial markets research of Rabobank, told the Global Times Tuesday.
