Addiction for stronger RMB spells trouble

In China's foreign exchange spot market, the yuan is allowed to rise or fall by 1 percent from the central parity rate each trading day. The possibility that China's central bank will tolerate more fluctuations in the future to aid the internationalization of the yuan causes concern, Tan said.

While the value of the RMB may yet to reach its real equilibrium, it is very close to it, making a stronger RMB not compatible with the status quo of the Chinese economy, said Ding Zhijie, head of the school of banking and finance at the University of International Business and Economics.

There is no such thing as undervaluation of the yuan as the exchange rate is largely determined by Chinese economic fundamentals, Ding added.

While China is the world's largest exporter, its economy shall not take this fact at face value, Tan said, citing a lack of technology featured in exports and weak service-based trade.

Though ranked first in the "three horse chariots of the Chinese economy" - the other two being domestic need and investment - the anemic exporting sector is in fact playing the third fiddle, Tan said.

The key level of 6.500 against the dollar is recognized, to a large extent, by the government and market as the "the survival line" of an exporter, she added.

As the reform-minded Chinese new leadership is taking the country on a course of long-term and painful transformation for more quality growth led by consumption instead of investment, allowing the yuan to rise at a quick pace and big margin is risky when China has yet to resume a sound footing, Tan said.

RMB appreciation breeds profiteering

While the world's major currencies, including the US and Australian dollars, euro and yen are making a beeline to the lower territories, Tan said "it is perplexing to see the world put pressure on China for more rises in the yuan."

Tan declined to forecast whether the yuan will break the key 6.0000 level against the US dollar, saying the Chinese authorities could do more to reverse the habitual thinking of the continued rise of the yuan.

According to Tan, if the rise of the yuan is safely predictable, people would make an easy profit out of holding RMB instead of letting it support the real economy.

In that way, the currency would lose its function as a tool to invest and boost the country's economy and will be reduced to merely a personal tool for profiteering, she said.