The mechanism takes into account the previous day's closing rate, the supply and demand of the foreign exchange market, and the exchange rate of major world currencies. After the announcement, the RMB offshore spot rate against the US dollar fell sharply by 1.87%. However, this decline should not be interpreted as normal currency depreciation. As is known, exchange rate reform is one of the key factors contributing to opening up China's capital account and, consequently, accelerating the RMB internationalization process. With the previous non-market-oriented determination of the RMB exchange rate and the narrow floating ranges of the RMB exchange rate, the rate has failed to truly reflect the market supply and demand. The continued passive appreciation of the RMB against the US dollar and other currencies has been a huge burden on the Chinese economy; will greatly increase the flexibility of the RMB exchange rate. Statistically, from the first RMB exchange rate reform in 2005 until August 2015, the RMB appreciated by 29.3% against the US dollar, 47.98% against the euro, and 49.26% against to the Japanese yen. This new mechanism reduces administrative interference of the exchange rate, increases the flexibility of the exchange rate and helps eliminate the “two-tier system” (exchange rates between onshore and offshore markets are different).