SHANGHAI (Reuters). Managing market expectations and regulation in China must include minimizing yuan appreciation, a top official of the foreign exchange regulator of China has urged.

One problem for currency fluctuations and flexibility is that it could overshoot or deviate economically from its economic foundations. Guan Taio, global chief economist at BOC international, wrote in a Facebook post this weekend.

“Market supply and market demand were the main forces driving the yuan rallies this year,” he stated. He also said that orderly expanding domestic foreign exchange purchases and outbound investment channels would be key to stabilizing the currency.

It has performed well against the strengthening dollar this year and has risen about 3%. China’s unit is now at its strongest point since 2015, according to trade weighted data.

Guan said that “the soaring multilateralyuan exchange rates has raised concerns over competition.”

The former SAFE official suggested a number of policy recommendations, including eliminating discrimination in FX conversions to enable clients to choose whether they want to be converted onshore or offshore and improving the management of outbound investments schemes for qualified investors. This would support domestic FX purchase and FX risk hedge in domestic markets.

As a way to reduce yuan’s recent strength, the People’s Bank of China instructed financial institutions this year to keep more foreign currencies in reserve. This was done by increasing the foreign reserve requirement ratio (RRR). It has been raised by 200 basis point (bps) from 7% to 9%.